Stock MarketStock Market

CorporationCorporationLegal entity owned by Legal entity owned by stockholdersstockholders who all face who all face limited liability limited liability (responsibility)(responsibility) for the for the businesses' debtbusinesses' debt

Stock MarketStock Market

Started over 200 years ago in Started over 200 years ago in ManhattanManhattan

Stock Stock – a share that represents a portion of – a share that represents a portion of ownership ownership of a corporation of a corporation

4 types of stocks4 types of stocks

PennyPenny Growth (has potential, but unstable)Growth (has potential, but unstable) Secondary – well established, stableSecondary – well established, stable Blue Chips (safest & highest earnings – Blue Chips (safest & highest earnings –

Wal-Mart Exxon-Wal-Mart Exxon-Mobile)Mobile)

Dividend – Dividend – Cash payment (Quarterly)Cash payment (Quarterly)

•Stock Broker – Person who buys or sells stocks. He gets a commission from every

transaction

•Floor Trader – Completes the transaction on the floor of the stock exchange

Types of MarketsTypes of Markets

New York Stock Exchange (NYSE) – New York Stock Exchange (NYSE) – Largest exchange in the USLargest exchange in the US

NASDAQ-AMEX – specializes in tech NASDAQ-AMEX – specializes in tech & & energy stocks energy stocks

What you hear on the radio – What you hear on the radio – how to measure stock market how to measure stock market

performanceperformance Dow JonesDow Jones – The average of 30 large – The average of 30 large

corporationscorporations S&P 500S&P 500 – Measures 500 different – Measures 500 different

stocks to measure of stock market stocks to measure of stock market performanceperformance

Bull MarketBull Market – When the stock market – When the stock market risesrises steadily over a period of time steadily over a period of time

Bear MarketBear Market – When the stock – When the stock market market falls falls over a period of timeover a period of time

SEC - Security Exchange SEC - Security Exchange CommissionCommission

Keeps brokers/traders honestKeeps brokers/traders honest Requires public companies Requires public companies

(corporations) to disclose truthful (corporations) to disclose truthful financial informationfinancial information

Protects against insider informationProtects against insider information

(Martha, Martha, Martha)(Martha, Martha, Martha)

What makes stocks go What makes stocks go up/downup/down

Interest ratesInterest rates State of the economyState of the economy Time of the yearTime of the year PublicityPublicity

What to ask before you What to ask before you buy/sell a stockbuy/sell a stock

1.1. How much profit has the company How much profit has the company made recentlymade recently

2.2. Are their products in demandAre their products in demand

3.3. Is there a lot of competitionIs there a lot of competition

4.4. Check the P/E ratio (Price/Earning)Check the P/E ratio (Price/Earning)

- relationship between price and - relationship between price and annual earningsannual earnings

-the lower the better-the lower the better