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Chapter 12 "Turn In" Assignment.doc

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Chapter 12 "Turn In" Assignment.doc

1. 1. Type in your answers … SAVE it on your computer … send it to the instructor (upload it), by the due date, using the correct DROP BOX on the ANGEL website. 1. Why do corporations sell stock and bonds? 2. From an investor’s viewpoint, what is the difference between common and preferred stock? 3. Why are price-earnings ratios (P/E) important? 4. Explain the characteristics of each of these types of stock transaction orders. Market order = ___________________________________________________ Limit order = _____________________________________________________ Stop order = ______________________________________________________ 5. Stockholders for AVON approved a two for one stock split. After the split, how many shares of AVON will Ann have if she owned 360 shares before the split? 6. What government agency is responsible for keeping the stock market “honest”. 7. Name the TWO largest stock markets in the United States. 8. What are the stock ticker symbols for these SIX companies? Apple Computer = ________ Ford Motor Company = ________ Harley-Davidson = ________ Boston Beer Company = ________ Anheuser-Busch = ________ Cheesecake Factory = __________
2. 2. 9. Bob bought 100 shares stock at \$25 per share. He paid his broker a \$50 commission when he bought the stock. One year later, he sold the stock for \$35 a share. He paid his broker a \$50 commission when he sold the stock. During the year that he owned the stock he received \$100 in dividends. Calculate BOTH the Return … AND … the Yield on this investment. Return = _______________ Yield = ________________ 10. Describe how you can make a profit by using the technique of “selling short”. 11. What is an ETF – an “Exchange Traded Fund”. 12. CORP has reported “earnings-per-share” of .\$ 0.80. The stock sells for \$24 a share. What is the PE ratio: 13. How is a bond different than stock 14. According to the National Debt Clock (link is in “How Bonds Work”) – what is “each citizens share of” the national debt \$ 15. According to “Types of Bonds” – what is a zero-coupon bond … AND … and for what investment goal might they be a good choice? 16. Describe the investment technique called Dollar Cost Averaging (“Keys to Successful Investing”) … AND … what is it’s main advantage? 17. What are the “Four Major Ways to Invest” ?
3. 3. 18. What are three things that could affect a stocks price. 19. What is the difference between a growth stock and an income stock? 20. What is meant by the term “market capitalization”? Personal Financial Portfolio … Stock Evaluation. How can you evaluate stocks for investment. Below are TWO evaluation forms … AND a link to a site to look up information for this evaluation. Complete TWO of the evaluation forms. Use one form to evaluate the stock of COSTCO (symbol = COST). Use the second form to evaluate ANY other stock of your choice. Stock Evaluator http://moneycentral.msn.com/investor/research/wizards/srw.asp (start in the upper right column in the box labeled “Start Research For”: _____________ then click GO) Company Name Stock Symbol On Which Exchange is this Stock Traded What types of products or service does this company provide (industry sector) Total Market Capitalization Number of Shares Outstanding Current Share Price 52 Week High 52 Week Low Recent Volume Annual Income or Loss Last Dividend Amount Current P/E Ratio Current Yield Beta Debt to Equity Ratio EPS Institutional Ownership Other information you’ve found relevant to your decision to buy or not to buy.
4. 4. Stock Evaluator http://moneycentral.msn.com/investor/research/wizards/srw.asp (upper right column in the box labeled “Start Research For: _____________ then click GO) Company Name Stock Symbol On Which Exchange is this Stock Traded What types of products or service does this company provide (industry sector) Total Market Capitalization Number of Shares Outstanding Current Share Price 52 Week High 52 Week Low Recent Volume Annual Income or Loss Last Dividend Amount Current P/E Ratio Current Yield Beta Debt to Equity Ratio EPS Institutional Ownership Other information you’ve found relevant to your decision to buy or not to buy. Hints for to Evaluating Stocks Price-to-Earnings (P/E) Ratio: = Price per Share/Earnings per Share The P/E ratio is one of the most popular ratios investors use to evaluate a stock. The ratio tells you how much investors are willing to pay for a company's earnings. For example, if GE is trading at \$20 per share, and the earnings came in at \$2/share, then its P/E would be (20/2)=10. Generally, an ideal P/E ratio is considered between 10 and 30. Cash Flow: How much profit is the company making? Cash flow will tell you how much profit a company is making. The more cash flow a company has, the more excess cash they are likely to have to be invested. Also, a company with good cash flow is more likely to avoid bankruptsy. Is the Company Paying Dividends? When a company has a profitable year, they should theoretically pay some of those profits out to the stock holders. When evaluating a company stock, be sure to check whether the stock pays a dividend, how long they've paid that dividend, and how much it is. A steady dividend makes investors happy, which leads to a raising stock price. A company like GE has paid a steady dividend every year since 1969.
5. 5. Beta: How Volatile is the stock? Beta measures the volatility of a stock compared to averages of the S&P 500. If a stock moves the exact amount as the S&P in a given period, then the Beta will be exactly 1. If a stock moves up and down twice as much as the S&P, then it will have a Beta of 2. This means it is twice as volatile as the S&P. If the stock moves half as much as the S&P, the Beta will be 0.50. Market Capitalization (Cap): Total Market Value of a Company's Outstanding Shares This formula is important when evaluating a company because it helps gauge the risk and growth potential of a stock. The categories for market capitalization are: Mega Cap, Large Cap, Mid Cap, Small Cap, Nano Cap. Generally, any stocks in the first three categories, Mega, Large and Mid Cap, are considered safe investments. Any company with a market cap of above \$1 billion is usually a safe investment. Anything below that (Small or Nano Cap) is usually high risk, but high reward potential. Book Value per Share: Total Assets - Liabilities/Total Number of Outstanding Shares This formula is basically the total value of the company, divided by the number of common shares. It basically tells you how much of the companies value is held in each share. In otherwords, if the company liquidated all their assets tomorrow, this is how much each share would be worth. This formula is very straightforward for finding what the market price of a stock could be Moving Average A technical analysis term meaning the average price of a security over a specified time period (the most common being 20, 30, 50, 100 and 200 days), used in order to spot pricing trends by flattening out large fluctuations. This is perhaps the most commonly used variable in technical analysis. Moving average data is used to create charts that show whether a stock's price is trending up or down. They can be used to track daily, weekly, or monthly patterns. Each new day's (or week's or month's) numbers are added to the average and the oldest numbers are dropped; thus, the average "moves" over time. In general, the shorter the time frame used, the more volatile the prices will appear, so, for example, 20 day moving average lines tend to move up and down more than 200 day moving average lines.