Textbook Notes (368,552)
Canada (161,962)
MGTA02H3 (363)
Chapter 19

Management II Chapter 19

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Management (MGT)
Chris Bovaird

Management Chapter 19 Understanding Securities and InvestmentsSecurities MarketSecurities stocks and bonds which represent a securedassetbased claim on the part of investors that can be bought and soldHolders of stocks and bonds have stake in the business stock represents ownershipPrimary and Secondary Markets for SecuritiesPrimary securities markets the sale and purchase of newly issued stocks and bonds by firms or governmentsPrivate placements stocks sold to one buyer or small group of buyers keeps plans confidentialInvestment banker any financial institution engaged in purchasing and reselling new stocks and bondsThree types of investment banking services oThey advise company on timing and financial terms for new issueoUnderwriting buying new securities bankers some risk of issuing new securityoCreate distribution network that moves new securities to customers through banks and brokersSecondary securities market the sale and purchase of previously issued stocks and bonds handled by organizations such as Toronto Stock ExchangeStockCommon StockStocks are bough in hopes that they will increase in value capital gain or dividend incomePar value the arbitrary value of a stock set by the issuing companys board of directors and stated on stock certificates used by accountants but of little significance to investors cannot be distributed as dividendsMarket value the current price of one share of a stock in the secondary securities market the real value of a stockoCan be influence by objective factors companys profits and subjective factors rumours investor relations and stockbroker recommendations Book value value of a common stock expressed as total stockholders equity divided by the number of shares of stockoMarket value is usually higher than book value so some investors buy stock when the market price falls near the book value on the principle that its underpriced and its value should increaseInvestment traits of common stock risky uncertainty can quickly change value when company is doing bad it cannot pay dividends Bluechip stock stocks of wellestablished financially sound firmsoThe value of hightech stocks fluctuate more than the value of traditional stocks and although traditional bluechip stocks have more earnings per share stockholders like to invest in hightech stocksMarket capitalization the dollar value market value of stocks listed on a stock exchangeoComputer by multiplying the number of a companys outstanding shares by the value of each share Preferred StockPreferred stock is usually issued with a stated par value ex 100 and dividends are expressed as a percentage the of par value
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