Brooks Chapter 7 continued- Stock Market

Brooks Chapter 7 continued- Stock Market - The Stock Market...

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1 The Stock Market Steve Casper scasper@temple.edu March, 2011
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2 What is a Stock § Stock represents ownership of a firm § Claim to assets and cash flow, once the following are paid § Creditors § Employees § Suppliers § Taxes
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3 Common Stock § Voting Rights (Elects Board of Directors) § No Maturity Date – infinite § Dividends § Not paid by all firms § Taxable to shareholder (Double taxation) § Authorized Number of Shares § Issued § Treasury Stock
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4 Preferred Stock § Constant Dividend § “Preferred” over Common Stock § Dividend does not increase § Often no voting rights § Looks more like debt § Some Preferred Stock convertible to common § Not used by many firms
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Cash Flow Common Stock Dividends Pref. Stock Dividends Bond Payments Time Common Stock as a Residual Claim
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6 Important Factors in Evaluating a Stock § Profit § Earnings per share - EPS § Growth Rate § Earnings and Revenue § Price Earnings ratio – P/E ratio § Dividends § Capital Structure – Debt (more risk) versus Equity ( more value) § Industry – High growth versus Low growth
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Brooks Chapter 7 continued- Stock Market - The Stock Market...

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