Note for FIN 101 with Professor Lewis at KU
Note for FIN 101 with Professor Lewis at KU
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This 4 page Class Notes was uploaded by an elite notetaker on Friday February 6, 2015. The Class Notes belongs to a course at Kansas taught by a professor in Fall. Since its upload, it has received 20 views.
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Date Created: 02/06/15
0 Stop Loss Order 0 Setting a stoploss order for 10 below the price you paid for the stock will limit your loss to 10 Allows investors to determine their loss limit in advance preventing emotional decision making 0 Great idea to use stop order before you leave for holidays or enter a situation in which you will be unable to watch your stocks 0 Stop Loss Medical Employer 0 Coverage purchase by employers in order to limit their exposure under self insurance medical plans 0 Stop Loss Individual 0 Under Individual Stop Loss the Insurer will reimburse the employee the amount by which specific losses exceed the individual stop loss amount during the coverage period 0 Returns from investing 0 Current income bond interest stock dividends rent on real estate 0 Capital gains increase in market value 0 Interest on interest returns must be reinvested for compounding o Ifyou want greater return you will most likely have to accept greater risk 0 Amount of risk is directly related to expected return 0 Approximate Yield Function Look Up November 14 2011 0 Investing in Common Stock 0 Each share represents equity or part ownership in the company 0 Most small shareholders assign their votes to a proxy I Assign stockholder s voting rights to another I Less important to small shareholders o Dividend YieldAnnual dividend per sharemarket price per share 0 Dividends 0 Cash most common and desirable 0 Stock new shares given to current shareholders November 15 2011 o FICO Score 0 Get it in 0 Income statement 0 SalesRevenue Cost of Goods Sold Gross Margin Sales and General Admin Expenses Taxes 0 Net Income 0 Dividend Yield Annual dividend per sharemarket price per share 0 Key Measures of Performance 0 Book value amount of stockholders equity in a firm 0 O O O I Good when book value steadily increases and market value exceeds book value 0 Book Value Total Assets liability preferred stock 0 Net Profit Margin One of the most widely used measure of profitability I Relates net profit to sales I The more money the company earns the higher the net profit I Stable ofincreasing net profit margins are a good sign 0 Return on Equity shows firm s overall profitability I Ratio of net income to common equity I Re ects company s management ofassets operations and debt I Better ROE Better financial condition and competitive something November 21 2011 0 Types of Common Stock 0 BlueChip Large well established companies 0 Growth Above average growth rates in operations and earning I Usually no or low dividends I May experience something dumb 0 Income Fairly stable earning stream I Pay high dividends I Attractive to those seeking current dividend o Speculative I High risk companies I Company products or industry may be new or unproven I Stock prices may be highly volatile o Cyclical I Stock prices move in same direction as business cycle 0 Defensive I Stock prices are stabke in economic downturns o MIDCAP I Market capitalization of 210 bill 0 Small cap I Market cap of 2 bill or less 0 Making the Investment Decision 0 Putting a value on stock 0 Timing Investment 0 Flow back earnings I Dividend reinvestment plan 0 Investing in Bonds 0 Fixed income security 0 Interest Rates and bond prices move in opposite directions 0 Versatile O O Preservation and long term accumulation of capital Lower risk than return of stock Bond Issue Characteristics O 0000 000 0 Like a loan bondholder lends money to issuer Interest usually paid every 6 months Coupon Par value Principal amount repaid to bondholder at maturity I Usually 1000 on a corporate bond Offer current income Selling before maturity may generate capital gains or losses Collateral Sinking Fund I Annual repayment schedule Call Feature The Bond Market OOOOO Treasury Bonds Agency and MortgageBacked Bonds Municipal Bonds Corporate Bonds Zero Coupon Bonds November 28 2011 Bond Issue Characteristics 0 O O 0 Like a loan bondholder lends money to issuer Interest usually paid every 6 months Coupon0 annual interest rate paid by issuer Collateral I Senior or Secured Bonds Backed by a legal claim on specific property 0 Liquidaated to pay bondholders is issuer defaults Sinking Fund I Annual repayment schedule detailing used to pay off the issue Call Feature I Bond provisions must state ifbond can be called prior to maturity 0 Conditions Freely callable noncallable deferred call The Bond Market 0000 0 Treasury Bonds Agency and mortgage backed bonds Municipal bonds Corporate Bonds Zero Coupon Bonds Municipal Bonds 0 Issued by state and local gov o Considered quottax free bonds since interest usually free from federal income tax 0 Fully taxable equivalent yield Yield on municipal bond1taX rate 0 Zero Coupon Bonds 0 Pay no annual interest 0 Sell at a deep discount to par value 0 Pay only at maturity 0 Issued by corporations municipalities and federal agencies 0 Convertible Bond 0
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