The Stock Market Flashcards
Law of Demand
As price increases demand decreases
As price decreases demand increases
Law of Supply
As price increases supply increases
As price decreases supply decreases
In the stock market, price is constantly adjusting to?
Achieve equilibrium
What is the greatest influence on price
Scarcity
What is the stock market?
A place to buy and sell shares (partial ownership) in companies
What is a secondary market established on?
On supply and demand
Who’s performance is viewed as a barometer of the economic health of the U.S.
The stock market
What is liquidity?
Ability to convert capital into cash
What is a sole proprietorship?
all profits/all risks
complete authority
What is a partnership?
Limits liability/share responsibility
Potential to raise more capital
What is a private corporation?
Business exists as legal entity
What is a public corporation
Shares sold on stock markets
What methods corporation use for raising capital?
Retained earnings
Bank Loans
Bonds
Stocks
What is a retained earning?
Reinvest profit -> slow process
What is a bank loan?
Borrow money, pay back with interest -> difficult to get large loans
What is a bond?
Money loaned from individuals to corporation/government
What is a stock?
Shares - ownership of a pert of (a share in) a corporation
What is the general investment rule?
The greater the risk, the greater the potential return
What is extremely liquid?
Savings Account
What are Government bonds?
Federal - U.S. Savings Bonds
State
Municipal - “muni’s”
What are Corporate bonds?
Most are Debenture Bonds
Most common form -> unsecured bonds
Mortgage Bonds
-Backed by asset(s) of corporation
Junk Bonds
-High risk/high yield
What are preferred stocks?
Pays regular dividend
What are common stocks?
May or may not pay dividend
What is a blue chip?
It’s a high quality, low risk common stock
52 week high/low?
Highest and lowest price paid for a stock during the past year
What is a Div. (dividend)?
Amount of last dividend paid on that stock
What is speculation?
Trying to make a large amount of money in a short period of time using high risk stocks.
Types of Speculation
Buying long
Selling short
What is buying long?
Buying stock immediately and selling later at a profit
What is buying on margin?
buying stocks with borrowed money
What is selling short?
Sell borrowed stock at a high price
buy it back later at a lower price
return stock to lender
keep profit
Factors that drive a stock price?
Trust in a company
A company’s financial health - annual reports
An industry’s health
Natural disasters, war, foreign policy, pandemics etc.
Economic trends (inflation, unemployment)
