Capital Market Stocks

1
Capital Market - Stocks

• Common Stock Dividends (if any) are set by the
  board of directors size varies.
• Preferred Stock Dividends are set (fixed) at
  time of stocks issuance perpetuity (dividends
  continue forever)
• Preferred dividends are paid before common
  dividends may be paid

2
Measuring Stock Value

• Par value set in corporate charter represents
  face value used by accountants in financial
  reporting
• Book value Assets - (Liabilities P/S) Also an
  accounting measure
• Intrinsic value maximum price an investor is
  willing to pay in order to earn a required rate
  of return

3

• Market value current price
• Market capitalization MV x shares outstanding
• Small cap lt 1 billion
• Mid cap 1 - 12 billion
• Large cap gt 12 billion
• Brackets change with the times

4
Number of Shares of Stock

• Authorized shares corp can issue according to
  its charter
• Issued shares ever sold to public
• Outstanding shares currently held by public
• Treasury shares bought back by corp can be
  used for stock options

5
Rights of Common Shareholders

• Share in declared dividends
• Elect board of directors
• Sell/transfer ownership
• Receive annual reports
• Residual rights
• Vote on mergers, auditor, changing shares
  authorized

6
Terms Used to Describe Stocks

• Blue Chip large, well-established firms leaders
  in their industries high quality long and
  stable record of earnings
• Income stocks pay high dividends
• Growth stocks high rates of growth in operations
  earnings pay little or no dividends

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• Speculative stocks no record of success but
  potential for substantial price appreciation
• American Depository Receipts (ADRs) shares of a
  foreign company traded in U.S. market in dollars
  ADRs traded on NYSE, AMEX, NASDAQ

8
Classes of Stock

• Some companies issue more than 1 class of stock
• Class A, Class B, etc. have no standard
  definition
• e.g. Ford - 2 classes - common class B (owned
  by Ford family) class B gets enough votes/share
  for family to maintain 40 control

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• E.g. Coors 2 classes of stock
• Class A held by founders, has vote
• Class B held by public, no vote, cant be listed
  on NYSE because it wont list nonvoting stock