Chapter 8 Section Reviews Flashcards
Owning shares of stock not only makes a person a partial owner of a corporation but also gives that person what other opportunity?
The opportunity to vote on business decisions proposed by the board of the directors.
What is the most prevalent type of stock that most corporations offer?
Common
Why do corporations sell stock?
To raise money for research, purchasing necessary materials, expansions, and so forth.
What are the two principal reasons that individuals purchase shares of stock?
To make a profit and to receive dividend payments.
In what two ways is a stock market like other markets?
It is a location where those who wish to buy and sell a product come together, and the price of its products reflects what consumers are willing to pay.
What is the most well-known stock exchange in the world, and what accounts for its importance?
The NYSE; its importance is based on its history, location, and the corporation that it lists.
What is the largest stock exchange in the United States that has no trading floor?
NASDAQ
What is the most well-known stock index in the United States, and who developed it?
The DJIA; Charles Dow
List three reasons that stock markets are important to the economy.
- They provide a place where corporations can raise needed revenue.
- They provide opportunities for individuals can invest.
- They provide valuable information concerning the state of the nation’s economy
What is the danger of speculation?
There is a high risk of losing your entire investment.
When and why was the SEC founded?
The SEC was founded following the Great Depression to protect investors by regulating brokers and exchanges and ensuring that corporations provide accurate and current information to the public.
How does a person control a corporation?
By obtaining a majorly ownership of that corporation’s shares of stock.
Identify each of the following as being associated with common (C) or preferred (P) shares of stock:
A. shareholders receive dividends first
B. owners have voting rights
C. considered true ownership
D. less risky
E. if the corporation fails, these shareholders receive any leftover revenue ahead of other shareholders
A. P B. C C. C D. P E. P
Explain how the phrase “buy low; sell high” applies to buying stock for profit.
Investors buy stock at what they believe will soon be its market value and sell it when the price rises above their purchase price, thus making a profit on each share.
In what two countries did stock exchanges originate?
Great Britain and Holland
