Week 6 Flashcards
What is a Stock Market?
A stock market refers to several exchanges where shares of publicly held companies are bought and sold.
Stock markets operate under a defined set of regulations.
What are the main functions of the stock market?
The stock market allows for:
* Buyers and sellers of securities to meet and transact
* Price discovery for shares of corporations
* Serving as a barometer for the overall economy
Market participants benefit from fair prices, high liquidity, and transparency.
How do stock markets operate?
Stock markets provide a secure and regulated environment for transactions with zero to low operational risk, acting as primary and secondary markets.
What is an Initial Public Offering (IPO)?
An IPO is the process through which companies issue and sell their shares to the public for the first time, helping to raise capital from investors.
What is the significance of the stock market in a free-market economy?
The stock market allows companies to raise money by offering stock shares and corporate bonds, and enables investors to participate in financial achievements, make profits, and earn income through dividends.
How do stockbrokers function in the stock market?
Stockbrokers act as intermediaries between stock exchanges and investors, buying and selling stocks.
What is market capitalization?
Market capitalization refers to the total dollar market value of a company’s outstanding shares of stock.
What is Average Daily Trading Volume (ADTV)?
ADTV is the average number of shares traded within a day for a given stock.
What does the P/E Ratio represent?
The price-earnings ratio (P/E) helps shareholders understand the value of their ownership in a company by dividing the current market price of common shares by the earnings per common share (EPS).
What is Dividend Yield?
Dividend Yield is a ratio that shows how much income is earned in dividend payouts per year for every dollar invested in a stock.
True or False: The mid-term exam will cover content from documentaries.
False
The mid-term exam covers Weeks 1 to 6 lectures but not documentaries.
What are some topics included in the mid-term review?
Topics include:
* Basic Needs & Economic Question
* Scarcity
* Supply/Demand Curve & Equilibrium Point
* Elasticity of Supply/Demand
* Various Market Systems
* Deficit vs Debt
* Various forms of Taxation
* GDP
The exam will also cover job markets and price-makers vs. price-takers.
Fill in the blank: The stock market acts as a platform for __________ and investments to be channeled into productive opportunities.
[savings]
What roles do investment bankers play in the stock market?
Investment bankers represent companies in capacities such as taking private companies public through an IPO or managing mergers and acquisitions.
What is the role of portfolio managers in the stock market?
Portfolio managers invest portfolios, or collections of securities, on behalf of clients.
True or False: The stock market has no impact on economic growth.
False
The stock market contributes to capital formation and economic growth.
What is the main benefit of the stock market for individual investors?
Investors can participate in the financial achievements of companies and earn profits through capital gains and dividends.
What do high degrees of liquidity in the stock market ensure?
High degrees of liquidity ensure that market participants can buy and sell securities easily.
