Intro to the Stock Market

1. What exactly is a stock and why do companies sell stock in the first place?

> A stock is a share of a particular company or corporation, companies sell stocks to raise capitol without the obligation to repay borrowed money.

2. What is the difference between a public and a private company?

> A public company sells shares to the public and has more than 50 shareholders, while a private company does not sell their shares to the public and has less than 50 shareholders.

3. What is the Dow Jones Industrial Average?

> The Dow Jones Industrial Average is simply the average value of 30 large industrial stocks. Big companies like General Motors(GE), IBM and Exxon are the kinds of companies that make up this index. These are "market averages" designed to tell you how companies traded on the stock market are doing in general. If the economy is doing well then the prices of stocks as a group tend to rise. If it is doing poorly, prices as a group tend to fall.

4. What is a blue chip stock?

> A "blue chip" stock was a nickname given to a stock that was thought to be safe. They are thought to be in financial shape. Blue chips generally pay dividends and are favorably regarded by investors. They are also referred to as bellwether issues.

5. What is the New York Stock Exchange and the NASDAQ?

> The New York Stock Exchange is a corporation operated by a board of directors, responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE also oversees the transfer of members' seats on the Exchange, judging whether a potential applicant is qualified to be a specialist. And NASDAQ which stands for National Association of Securities Dealers Automated Quotations System is a general rule of thumb, it is where most technology stocks are traded. Also a computerized system that facilitates trading and provides price quotations on some 5,000 of the more actively traded over-the-counter stocks. High-tech companies are typically traded on the NASDAQ, such as Microsoft, Intel, Dell and Cisco.

6. What is a mutual fund?

> A mutual fund is a company that brings together money from many people and invests it in stocks bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings.

7. What are some of the biggest companies on the stock market, how much is their stock?

> Some of the biggest companies on the stock market are McDonalds, Walt Disney Company, Home Depot, and Ebay. McDonalds stock is 8.9M, Walt Disney company stock is 10.5M, Home Depot's stock is 210M and Ebay's stock is 10M.

8. What is the PE ratio of a stock?

> A PE ratio of a stock is calculated by dividing the market price per share by the current or a projected annual earnings per share. It measures the market's expectations regarding earnings growth potential and risk.

9. What is a stock dividend?

> A stock dividend is a dividend paid to stockholders in shares of stock, often used in place of or in addition to a dividend paid in cash.