Companies
   Type of Companies            Private
      Sole-proprietorship          No trading on the open 
      Partnership                   market
      Corporations                 Ex:  M&M Mars
                                 Public
                                    Stock traded on open 
                                     stock market
                                    Ex:  Hershey
                                    We will be talking about 
                                     publicly traded 
                                     companies!
                             IPO:  Initial Public Offering vs
                       Trading on the Secondary Market
       IPO                                                                       Secondary Market
            Also known as Primary                                                     Known as “the market”
               Market                                                                  defining characteristic is 
            Where securities are                                                         that investors trade among 
               created                                                                    themselves. 
                                                                                             investors trade previously 
            IPO occurs when a private 
                                                                                              issued securities without 
               company sells stocks to                                                        the issuing companies' 
               the public for the first                                                       involvement. 
               time.                                                                   Ex:  if you buy Microsoft 
            Company needs to file with                                                   stock, you are dealing only 
               SEC (Securities Exchange                                                   with another investor who 
               Commission) to go public                                                   owns shares in Microsoft. 
                                                                                          Microsoft (the company) is 
                                                                                          in no way involved with the 
                                                                                          transaction
                   Stock Exchanges
   
     NYSE--oldest in world
      Human component as well as computer
      Historically was an open auction:  buy low and sell 
       high is goal
   
     NASDAQ--—Nat’l Association of Securities Dealers 
     Automated Quotations. 
      Second largest stock market in dollar volume in the 
       United States behind the New York Stock Exchange. 
      It is a completely electronic stock exchange
      Composite of many stocks—many tech stocks
   
     Stocks traded Mon-Fri 9:30-4:00 (EST)
                       Stock Indexes
   A benchmark to judge performance of investments
   
     Dow-Jones
      30 blue-chip stocks 
      Representative of the US economy as a whole (less the 
      transportation and utility sectors )
   
     S&P 500
      500 large companies
      many consider it the best representation of the U.S. 
      stock market 
   
     Nasdaq
      often used to judge the progress of the technology 
      sector, since NASDAQ has so many tech stocks
         Factors that Influence the Market
    The company itself-                     The Market-
        When co. is doing well,                 The demand (and supply) 
         profits are up, debt is                  of a product or service can 
         down, stock is                           determine a co.’s ability to 
                                                  make a profit.  Demand 
         attractive                               high = increase stock value
    Interest Rates-                         Non-market risks:
        When interest rates                     unpredictable & uncontrollable, 
                                                  such as natural disaster
         are low, savings acc’ts             Industry risk:  
         aren’t profitable,                      events that effect single 
        return on investment                     industries, such as fads, trends
         not keeping pace with               Political risk:  
         inflation, so people                    taxes & gov’t regs make 
         look to stock to                         investments less attractive 
                                                  (environmental regs)
         increase their returns