Final Exam Notes - HACE 3200 Final Exam Chapters 13-17

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HACE 3200 Final Exam Chapters 13-17 Chapter 13: Investing in Stocks I. Basics of Investing in Stocks a. Stock is a share in the ownership of a company b. Stock represent a claim on the company’s assets and earning c. Whether you say shares, equity, or stocks, it all means the same thing II. Company Ownership a. One vote per share to elect board of directors at annual meetings b. Just because you have shares, doesn’t mean you don’t have to pay for the product III. Stock Certificate a. A fancy piece of paper that proves your ownership b. Now brokerage keeps these records electronically IV. Stock Basics: Buying Stocks a. Using a brokerage firm i. Full service brokers ii. Discount brokers b. DRIPs and DIPs i. Dividend Reinvestment Plans (DRIPs) ii. Direct Investment Plans (DIPs) are plans with which individual companies for a minimal cost allow shareholders to purchase stock directly from the company V. Brokerage Firms a. Charles Schwab b. Morgan Stanley c. Edward Jones d. Merrill Lynch VI. When Brokerage Firms Go Bust… a. Customer’s accounts are generally safe, they can’t be liquidated to save the firm b. Recent examples: i. Bear Sterns was bought by J.P. Morgan ii. Lehman Brothers filed for bankruptcy VII. Why Consider Stocks? a. Over time, common stocks out perform all other investments b. Stocks reduce risk through diversification c. Stocks are fairly stable d. Growth of investment is determined by more than just interest rates VIII. Stock Indexes: Measuring the Movements in the Market a. Dow Jones Industrial Average (DJIA)
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i. Tracks 30 blue chip stocks ii. General Electric is the only original stock still on the index iii. Others: Intel, Walt Disney, Microsoft, Boeing, Caterpillar, Home Depot, McDonald’s, Walmart b. NASDAQ IX. Basic Common Stock Terminology and Features a. Limited liability: if the company goes broke, you can only lose the amount you invested b. Claim on assets: as a shareholder you have a right to any earnings of the company after all other obligations are met c. Claims on earnings: common shareholders can claim their assets only after debtors and preferred stock holders have been paid d. Voting rights: you have the right to vote; however, this right is normally executed through a proxy e. Proxy: and agreement allowing a designated party to “vote you shares” f. Stock splits: the company cuts the stock price and you get more shares, but retain the same total investment g. Stock repurchases: companies buying back their own stock h. Stock spin out: where a company splits off sections of itself as a separate business i. Spin out company takes assets, intellectual property, technology, and/or existing products ii. Management team from parent company iii. The common definition of spin out is when a division of a company or organization becomes an independent business. X.
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This note was uploaded on 09/21/2011 for the course HACE 3200 taught by Professor B during the Spring '09 term at University of Georgia Athens.

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Final Exam Notes - HACE 3200 Final Exam Chapters 13-17

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