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Economics > Ch. 1 - The Stock Market > Flashcards

Ch. 1 - The Stock Market Flashcards

1
Q

What is an equity?

A

Ownership of corporation (stocks)

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2
Q

Shares

A

Portions of a stock

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3
Q

What is a dividend? Possible benefit?

A

The portion of corporate profits paid out to holders

- paid 4 times a year

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4
Q

What are capital gains? capital loss?

A

Gain - sell stock higher than bought

Loss - sell stock lower than bought

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5
Q

What are the types of stock?

  • by dividend
  • by vote
A

By dividend…

1) Income Stock
2) Growth Stock

By vote…

1) Common Stock
2) Preferred Stock

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6
Q

What is an income stock?

A

Pays dividend regularly (Guaranteed payment)

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7
Q

What is a growth stock?

A

Pay few/no dividend. The reason is that the company reinvests $ into the business so value will go up.

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8
Q

What is a common stock?

A

Voting owners of a stock.

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9
Q

What is a preferred stock?

A

Non voting owners but receive dividends first

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10
Q

What is a stock split and why?

A

The division of a single share of stock into more than one share. Due to high stock price potential investors are discouraged, so divide stock to lower price.

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11
Q

Why are stocks riskier than bonds?

A

Though returns are higher, if there is a bankruptcy then bondholders get money back first

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12
Q

Stockbroker?

A

A person who links buyers and sellers of stock

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13
Q

Brokerage firm

A

A business that specializes in trading stocks.

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14
Q

Stock exchange?

A

A market for buying/selling stock

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15
Q

What is the New York Stock Exchange (NYSE)?

A

The US’s largest/powerful exchange. Handles only the largest and best known companies.

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16
Q

What are blue chips?

A

Refers the the largest and best known companies of NYSE.

17
Q

What is the OTC market?

A

Electronic marketplace for stock/bond

18
Q

What is the National Association of Securities Dealers Automated Quotations (NASDAQ)?

A

The American market for OTC securities.

19
Q

What are futures?

A

Contracts to buy or sell at a specific date in the future at a price specified today. (grain/livestock)

20
Q

What are options?

A

Contracts that give investors the choice to buy/sell stock for a specified price for an amount of time

21
Q

What is a call option?

A

The option to buy shares of stock at a specified time in the future.

22
Q

What is a put option?

A

The option to sell shares of a stock at a specified time in the future.

23
Q

What is daytrading?

A

Predict minute-by-minute changes based on computer and do a dozen of trades (risky)

24
Q

What is bull market?

A

A steady rise in the stock market over a period of time

25
Q

What is bear market?

A

A steady drop in the stock market over a period of time

26
Q

What is the Dow?

A

An index that shows how certain stocks have traded

  • 30 largest companies in various industry
  • changes to represent stock market overall
27
Q

What is the S&P 500?

A

An index that shows the price changes of 500 different stocks.
- mainly NYSE

28
Q

What is the Great Crash?

A

The collapse of the stock market in 1929.

29
Q

What is speculation?

A

The practice of making high-risk investments with borrowed money in hopes of getting big returns

30
Q

What is IPO?

A

Initial Public Offering. First high an investment banking to figure out how much $ can be raised. Then file with SEC (Securities and Exchange Commission) the financial statements.

31
Q

Why do stock prices fluctuate?

A

Driven by supply/demand. Demand depends on past performance, current profile, industry, upcoming profits, health of economy, and current events.
- reflects the worth determined by investors

32
Q

What is yield?

A

Dividend over the price. Want a higher yield.

33
Q

What is EPS?

A

Earnings per share. Shows how much each share is worth in relation to how much company is making.

34
Q

What is P/E?

A

Price to earning. Compares company to competitors. How much an investor is willing to pay for $1 of company earnings. Speaks of demand. Can show over value and under value.

35
Q

What is a cyclical stock?

A

Luxury industries for good economic times.

36
Q

What is defensive stock?

A

Necessities for not so good economic times.

Economics (5 decks)

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