Slide MGT312 Slide10

Investing in Stocks and

Investing in Stocks and

Bonds

Bonds

Common Stock

• It is the most basic form of ownership in a corporation.

• It offers dividend gain and capital gain.

• It has a residual claim after higher level claims are fulfilled.

• _{It grants the holders limited liability and}

Preferred Stock

•It is a type of fixed-income ownership security.

•_{It grants the holders priority of dividend}

before common stock holders.

•_{Convertible preferred stocks are the}

Price/Earnings (P/E) Ratio

• P/E ratio is current market price divide by Earnings per Share (EPS).

• It is a method of valuing stocks.

• It shows how expensive the stock is versus company’s earnings.

• _{P/E ratio of 15 means investors are paying}

Beta

•Beta is the sensitivity of a stock to the market movement.

•_{A beta of +1 indicates the stock as risky as}

the market.

•_{A beta of higher than +1 indicates the}

Types of Stocks

•

Cyclical stocks are company’s stocks

whose performance are influenced by the

economy business cycle.