Stocks represent ownership shares in a company. Common shares give investors ownership of a small portion of a company and are traded on stock markets. Equity shares represent ownership in a company's revenue stream once debts are paid. The value of a stock is determined by factors like the company's financial prospects, earnings projections, and economic conditions. There are three main types of equity - common stock, which provides ownership and participation in company earnings; preferred shares, which have a defined dividend and priority over common shares; and warrants, which are long-term options allowing gains without buying common stock. Stock prices are set by trading between buyers and sellers and often reflect interest rates and the economy.

1. Stocks
What they are and what they do

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. 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. 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. 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. There are three types of equity

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. 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. 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. 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. 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. The payment terms for preferred shares are outlined
when they are issued so that investors know what to
expect

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. 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. For more financial information
regarding stocks, visit
www.finpipe.com