Stock%20Valuation2010Winter2010

Stock%20Valuation2010Winter2010 - If You Had Only Invested...

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1 Stock Valuation If You Had Only Invested a Dollar in 1926; Performance of U.S. Capital Markets, 1926 - 1998 $0 $1 $10 $100 $1,000 $10,000 1926 1936 1946 1956 1966 1976 1986 1996 Year-End log scale Stocks Long-term government bonds Inflation $2,349 $34 $9 Common Stock - Ownership shares in a publicly held corporation. Primary Market - Place where the sale of new stock first occurs. Secondary Market - market in which already issued securities are traded by investors. Stock Market c Dealers vs. Brokers A dealer maintains an inventory and stands ready to buy and sell A broker brings buyers and sellers together, but does not maintain an inventory. c New York Stock Exchange (NYSE) c NASDAQ New York Stock Exchange (NYSE) c More than 3000 stocks are traded on NYSE c Total market capitalization $16 trillion c Average daily volume exceeds 1 billion shares, about $40 billion each day. c Average 1.3 million orders/day NASDAQ c National Association of Securities Dealers Automated Quotations c Not a physical exchange- computer based quotation system c Large portion of technology stocks
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2 5777.6 4481.7 1989.5 1414.1 896.1 1067.7 1308.6 570.5 222 305.2 143.2 0 1000 2000 3000 4000 5000 6000 1997 Trading Value ($bil) NYSE Nasdaq London Paris Tokyo German Taiwan Zurich Osaka Toronto Amex Stock Market Initial Public Offering (IPO) - First offering of stock to the general public. Seasoned Issue - Sale of new shares by a firm that has already been through an IPO Lehman Files for Bankruptcy; Merrill Is Sold CNNFN 8/5/01-- IPO hotshots falter Dividend - Periodic cash distribution from the firm to the shareholders.
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3 P/E Ratio - Price per share divided by earnings per share. Circuit City Stock Price How much should I pay for a stock?
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4 Book Value - Net worth of the firm according to the balance sheet. Current Assets Fixed assets 1. Tangible fixed assets 2. Intangible fixed assets Current liabilities Long-term debt Shareholders’ equity Total Value of Assets Total Value of Liabilities and Shareholders’ Equity Net Working Capital Liquidation Value - Net proceeds that would be realized by selling the firm’s assets and paying off its
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Stock%20Valuation2010Winter2010 - If You Had Only Invested...

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