Unit III

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Unit III

  1. 1. Corporations When you hear the term “corporation”, what is the first company that comes to mind?
  2. 2. Best companies to work for… Fortune Magazine Revenue Profits 1. Wal-Mart Stores 378,799.0 12,731.0 2. Exxon Mobil 372,824.0 40,610.0 3. Chevron 210,783.0 18,688.0 4. General Motors 182,347.0 -38,732.0 5. ConocoPhillips 178,558.0 11,891.0 6. General Electric 176,656.0 22,208.0 7. Ford Motor 172,468.0 -2,723.0 8. Citigroup 159,229.0 3,617.0 9. Bank of America Corp. 119,190.0 14,982.0 10. AT&T 118,928.0 11,951.0 http://money.cnn.com/magazines /fortune/fortune500/2008/full_list /index.html
  3. 3. What is a Corporation? • Form of business organization recognized by law as a separate legal entity having all the rights of an individual. 90% of all • Responsible for approximately business.
  4. 4. Formation • Must file for permission from the federal or state government
  5. 5. Corporate Structure • People who buy stock in a company become part-owners with certain rights. 2 Types of Stock Preferred Stock: Common Stock: Less risky … less reward Basic ownership - Non-voting ownership - Type of stock purchased on a stock exchange (risk is involved) - First to receive dividends and first to get investment back if the - 1 share of stock = 1 vote company fails - Votes used to elect Board of Directors - Board of Directors set policies and goals, and hire a management team to run the company
  6. 6. Strengths of a Corporation Ease in raising financial capital: • Sell stock: people who buy stock become part- owners in the company. • Sell bonds: the corporation is “borrowing” money – Selling bonds is like receiving a loan Ease in transferring ownership: • Sell your stock and you are no longer an owner
  7. 7. Strengths of a Corporation Limited Liability You only risk the Unlimited amount of your If a stockholder Life investment in the company dies or sells his ownership, the The corporation, company can not its owners, continue is fully without him. responsible for its debts and obligations.
  8. 8. THE STOCK MARKET Essential Question Why do companies publicly trade?
  9. 9. • Places where buyers and sellers meet to trade securities • Members pay a fee to join • Trade can only take place on the floor of the exchange • Examples: • American Stock Exchange (AMEX) • Regional Stock Exchanges (Chicago, Philadelphia, Boston) • Global Stock Exchanges (Sydney, Tokyo, Hong Kong)
  10. 10. Philadelphia Stock Exchange
  11. 11. Stock Exchanges New York Stock Exchange: • Oldest, largest, most prestigious of all exchanges in the United States • Located on Wall Street in New York City • 1,400 seats (memberships) – some costly 1 million + • List stocks from approximately 3000 companies • Companies must meet stringent requirements related to profitability and size NASDAQ • “Over-the-counter” Market • An electronic marketplace for securities that are not listed or traded on an organized market
  12. 12. Measures of Stock Performance • Indicators that measure stock performance • Examples: • Dow-Jones Industrial Average • Standards & Poor’s 5000 • NASDAQ
  13. 13. How to Read a Stock Table 52 Wk 52 Wk % Sales Symbol Dividend P/E High Low Last Change High Low Yld 100 16.95 15.0 F .44 2.8 15 599 15.85 15.65 15.7 -.04 Highest price to date this Formula for year? calculating % yield: Next day’s opening price? Dividend Closing Price
  14. 14. Online Resources • http://finance.yahoo.com/ • http://www.nytimes.com/interacti ve/2008/10/23/business/2008102 3_NYSE_PANO.html • http://www.nyse.com/
  15. 15. Food for Thought… Why is the securities industry so closely regulated? What is at risk?
  16. 16. Anatomy of a Trade FROM THE MOMENT the opening bell rings at 9:30 a.m. to the closing bell at 4:00 p.m., market professionals are busy buying and selling securities, supported by 21st century technology that speeds and secures each transaction. It is the interaction between humans and technology that makes the New York Stock Exchange conduct business efficiently, ensuring equal opportunity to all investors. But each transaction must follow a certain path to completion. DIRECTIONS To understand the role of the market professionals and how a stock is traded at the NYSE, place the following steps in chronological order from the time Amanda Smith, the investor, decides to buy 100 shares of Great Computer Company stock to the time the order is executed.
  17. 17. 3M Harley Davidson Abercrombie & Fitch Home Depot American Eagle IBM AT&T Johnson & Johnson Bank of America Kellog’s Best Buy Lowes Boeing McDonald’s Coca-Cola Nike CVS Caremark PepsiCo Eastman Kodak Proctor and Gamble Exxon/Mobil Texas Instruments FedEx Corporation Under Armor Ford UPS Gap Verizon General Electric Wachovia General Motors Walt Disney Co.
  18. 18. Type Sole Proprietorship Partnership Characteristics Formation Strengths Weaknesses
  19. 19.  If you were planning to open your own business, which form of business organization would you prefer?  Support your answer with specific reasons.  Be prepared to share your response with the class!
  20. 20. Pure Monopolistic Oligopoly Monopoly Competition Competition How many firms are in the Industry? What degree of influence do individual firms have over price? Product Differentiation Do firms use advertising and other types of “non-price” competition? Is it easy or difficult for new firms to enter this market? Examples (At least 2 more)
  21. 21. Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 1 on this computer, Group 2 on the teacher computer, Groups 3 & 4 on the left side of the pod, Groups 5 & 6 on the right side of the pod
  22. 22. Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 1 on this computer, Group 2 on the teacher computer, Groups 3 & 4 on the left side of the pod, Groups 5 & 6 on the right side of the pod
  23. 23. Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 1 on this computer, Group 2 on the teacher computer, Groups 3 & 4 on the left side of the pod, Groups 5 & 6 on the right side of the pod
  24. 24. College Savings Foundation The State of College Savings Results: 2007 Survey of Parents
  25. 25. College Savings Foundation The State of College Savings Results: 2007

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