Stocks

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This presentation provides readers with an introduction to stocks. Common share, equity, valuation of stocks, and types of equity are just a few topics explained in these straight-forward and easy to understand slides. For further information about stocks, visit www.finpipe.com to learn more!

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Stocks

  1. 1. Stocks What they are and what they do
  2. 2. The term stocks usually means common shares. Common shares give investors ownership of a small portion of a company. Common shares are different from public shares, which are traded in stock markets and subject to regulation
  3. 3. Equity is viewed by the market as an ownership share in the revenue stream of a corporation’s income once all prior obligations and debts have been satisfied
  4. 4. Determining the value of an equity: • The characteristics of the stock as a financial security • The financial and business prospects of the issuer of the stock • The relative valuation of the particular stock versus other stocks • The valuation of financial securities in general and the stock market in particular
  5. 5. The share price is the relative value given to the corporation’s earning potential based on a number of factors, including: General economic conditions Earnings projections Projected corporate growth Corporate stages of development Financial ratio analysis
  6. 6. There are three types of equity
  7. 7. Common Stock o Common stock represents an ownership in a corporation o Common stockholders participate in the earnings stream of the corporation through dividends paid and capital gains made on a per-share basis
  8. 8. Preferred Shares o Preferred shares are stock in a company that have a defined dividend, and a prior claim on income to the common stock holder Warrants o A warrant is a long-dated option that allows the owner to participate in the capital gains (losses) of a firm without buying the common stock
  9. 9. Stock prices are set by the trading between buyers and traders • The overall price reflects the price that buyers are willing to buy at and the price sellers are willing to sell at • These prices often reflect interest rates and the prospects of the overall economy
  10. 10. There are various types of preferred shares: Fixed-Rate Retractable Soft-Retractable Floating-Rate Retractable Fixed Rate Perpetual Floating-Rate Perpetual Fixed-Floater Preferred shares are usually outside the general knowledge of the average investor
  11. 11. Preferred shares are differentiated by their maturity and term characteristics • A straight preferred share has no fixed maturity date • A retractable share has its maturity set at issue • A soft-retractable share has its retraction value payable in hard cash or in an equal value of common stock of the issuer
  12. 12. The payment terms for preferred shares are outlined when they are issued so that investors know what to expect
  13. 13. Types of payment provisions: • A fixed-rate preferred share provides for a set or fixed-rate dividend upon issue • Floating-rate shares provide for a dividend that is paid by reference to a market interest rate • A Dutch Auction share has its interest rate set as the outcome of a reverse auction where bidders indicate the interest rate that they are willing to accept
  14. 14. Dividends Dividends are payments that a company makes to its investors on its outstanding shares. A company pays dividends on both its common and preferred shares. Dividends are made out of a company’s profit or retained earnings and the amount is set by a company’s dividend policy
  15. 15. For more financial information regarding stocks, visit www.finpipe.com
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