Econ Quiz 10/21 Flashcards
A portion of a corporation you can buy
Stock
Most prevalent stock type; represents true ownership of a firm
Common Stock
Distribution of a portion of the corporation’s profit
Dividends
Owners of this stock receive dividends before common shareholders and receive leftover revenue if the corporation fails
Preferred Stock
The first sale of stock by a private company to the public
Initial Public Offering (IPO)
person who generally works for a brokerage company and who specializes in buying and selling stocks for clients
Stockbroker
Fee that stockbrokers work for
Commission
Stock traders; physically present on trading floor toe execute requested trades
Floor traders
Electronic message board that indicates a transaction in stock purchases
Tape
Place where merchants trade stocks; bourses
Stock exchanges
Most well-known and reputable stock market in the world
New York Stock Exchange
Does “over-the-counter” stock trading, has no trading floor
NASDAQ
Another American Stock Market (NOT NYSE)
American Stock Exchange (AMEX)
Most well-known stock index by Charles Dow
Dow Jones Industrial Average (DJIA)
Commonly reported investment index, gives a broad business perspective on stocks
Standard and Poor’s 500 (S & P 500)
Privately managed stock portfolios
Mutual funds
A collection of stocks from different individual corporations
Stock Portfolio
Buying and selling stocks to take advantage of short-term price changes, very risky
Speculation
When stock prices rise in industry o across the market because of expectations and in the excess of true value
Speculative Bubble
Ensures Corporations provide accurate and current information to the public about finances and businesses dealings
Securities and Exchange Commission (SEC)
group of stocks that analysts use to get information about stock prices
Stock index
Common Stock Pros/Cons
Pros: Owners have voting rights to company, considered true ownership of a company, receive dividends,
Cons: last to be paid if firm fails, riskier than preferred stock
Preferred Stock Pros/Cons
Pros: less risky that common stock, more regular dividends, receive money first if business fails
Cons: not true ownership to company, more like debt that ownership, fixed dividend amounts, no guarantee of dividends
Compare/Contrast DJIA and S&P 500
The DJIA involves strictly industrial businesses while the S&P 500 is more broad and tracks other industries that have to do with things like service.
What is the SEC and why is it important
It ensures that corporations provide accurate and current information to the public about stock prices. This is important because without it, prices of stocks may be inaccurate. If the SEC had have been a thing in the 1920s, the Great Depression may not have happened because people would’ve known actual stock value, not just speculative numbers.
T/F Buy low, sell high
T, this is how you make money (the cheaper you buy and the more expensive you sell it for, the more you make)
