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Econ Business & SM
Midyear Prep
| Question | Answer |
|---|---|
| partnership | A partnership is a company with two or more owners that operate the business together. |
| sole proprietorship | A sole proprietorship is a company that has only one owner that operates the business. |
| charter | Written government approval to establish a corporation;includes company name, address, purpose of business, number of shares of stock, and other features of the business. |
| stock market | The purpose of the stock market is to get people to buy stocks. The stock market is a less risky way to earn a profit by buying because if you don't want it, sell it. people can have control/decision making power depending on how many shares bought. |
| bear market | When stocks are down, people are cautious |
| bull market | When stocks are up, people are optimistic, people buy more things (buyers dominate) |
| buying long | Having a “long” position in a stock means that you own the stock. Investors maintain “long” security positions in the expectation that the stock will rise in value in the future. |
| buying on margin | 1.When you borrow money from your broker to buy stock 2. If you can’t pay your loan, then the broker takes your stocks 3. Collateral to your stock portfolio |
| corporation | A legal entity created through a legal charter in some jurisdiction. Large companies, can have public stock, can own things, immortal, has limited liability, suffers double taxation |
| dividend | 1. When companies distribute their shares on a per share basis 2. You make a certain about for every share you have |
| limited liability | when owners are protected from the risks of losing their personal assets if anything goes wrong. |
| insider trading | trading in a public company's stock when you have non-public, unreleased information about the company (very hard to prove) |
| investment bank | intermediaries between a corporation and the financial markets: help corporations issue shares of stock in an IPO or an additional stock offering. They also arrange debt financing for corporations by finding large-scale investors for corporate bonds. |
| fundamental analysis | look at what a company does (is it profitable, a popular product, competent managers, debts) , takes effort/time to investigate in order to pick a good stock to buy |
| stock | a piece of a business |
| stockholder | owners of a corporation/company, elects the board of directors (more shares more votes) |
| board of directors | Oversee the company (meet a few times a year), discuss strategy, hire/fire management |
| price-earnings ratio | 1. Stock price/earnings per share 2. How much money you’re paying per unit of profit the business is making 3. High P/E ratio = growth stock 4. Low P/E ratio = value stock |
| beta | 1. Measures volatility: higher beta more volatile 2. Ratio of the stock’s movement to overall market movement 3. How much a stock price moves per unit time 4. Ex. If there’s a beta of 2 and the market is up 10% then the stock price is probably up 20% |
| selling short | 1. When you think the stock is going to fall so you borrow stock from somebody else then sell it, hoping the stock will go down 2. Then you buy the stock back and return it to the person you borrowed from |
| venture capitalist | 1. Shark Tank a. Look for small companies that need funding to expand that seem promising then invest in the company in return for shares of it (buy the company). b. Very hard to sell your share |
| quantitative analysis | building a sophisticated model and algorithms to choose a stock to buy |
| technical analysis | looks at historical stock price trends, patterns, what is the vibe of the market (bull/bear market) |
| Describe the relationship between the shareholders, the Board of Directors and management. | Shareholders elect the board of directors who hire/fire the management |
| Know the advantages and disadvantages of sole proprietorships, partnerships and corporations. | ok |
| What do the stories of Enron and The Big Short tell us about American capitalism and the stock market? | Enron; capitalism has problems: failed to recognize Enron's mark to market accounting as fraud, let Enron mess with Cali b/c little gov't restriction. TBS: stock market can have bubbles, people can lose their jobs and homes by investing when it pops. |
| Wall Street | stock market is volatile, insider trading can have large effects on the market, stock market's volatility is also b/c of the little gov't restriction in capitalism |
Created by:
undercoverkookie68
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