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IV.

Financing Decision: Stock Market

What are stocks?

A stock is a share in the ownership of a company. Stock represents a claim on the companys assets and earnings. As an owner (shareholder), you are entitled to your share of the companys earnings as well as any voting rights attached to the stock.

Why do companies issue stock?


At some point every company needs to raise money. Companies can either borrow it from somebody or raise it by selling part of the company.
By issuing stock, the company does not have to pay back the money or make interest payments.

What does the shareholder get out of the deal?


The shareholder gets the hope that the shares will be worth more in the future.

If the company does well, the stock will probably increase in value. If the company does not do well, the shareholder may lose the money he or she invested.

Whats an IPO?
IPO stands for Initial Public Offering. Its the first time the stock is available to the public to purchase.
The stock exchange itself is a secondary market. The primary market is the brokers.

What is a dividend?

A dividend is money that a company pays to its stockholders from the profits it makes.

Not all companies pay dividends to their stockholders. The only way shareholders in these companies make money is to sell the stock at a higher amount than they bought it at on the open market.

What is the difference between common and preferred stocks?


Common stock is the type most people purchase. It represents ownership of a company and a claim on part of the profits. Investors get one vote per stock. Preferred stocks dont have the same voting rights, but investors are usually guaranteed a fixed dividend. If the company is liquidated, they are paid off first.

How do stocks trade?


Most stocks are traded on exchanges such as the Philippine Stock Exchange, New York Stock Exchange or NASDAQ. The NYSE is a physical location whereas NASDAQ is a virtual market. Exchanges are simply places where buyers and sellers meet and decide on a price for a stock. Think of it as a flea market where buyers and sellers come together and agree on a price for a product.

How do stocks market works?

Video

Symbol AC AEV AGI Ayala Corporation

Name

Current Price (%) 551.5 (-1.16%) 44.85 (2.87%) 25.3 (0.80%) 27.85 (-0.18%) 31.9 (1.59%) 76.7 (0.59%) 4.85 (1.46%) 10.98 (1.67%) 89.4 (0.34%) 47 (2.17%) 5.7 (-0.87%) 17 (-0.58%) 1601 (0.06%) 93.2 (0.81%) 163.5 (-2.68%) 37 (0.00%) 106.4 (-0.09%) 3.09 (0.00%) 270.8 (0.74%) 4.85 (1.68%) 31.25 (-1.11%) 13.3 (-1.34%) 10.38 (-1.14%) 21 (0.00%) 246.8 (2.41%) 730 (0.69%) 83.1 (-2.18%) 16.14 (0.88%) 2940 (-0.20%) 117.1 (0.69%)

Previous Close

52-Week High (%)

52-Week Low 409 40 11.08 21.15 30.5 58.9 4.41 8.36 71.75 44 4.94 15.7 1020 65.9 93 31.4 90 2.15 240 4 26.2 9.88 8.8 17.88 214.4 561.6 76.4 13.56 2480 59.1

PE 30.89 10.36 18.69 42.39 9.61 19.22 92.19 156.86 19.51 12.75 12.34 7.5 30.92 34.25 45.89 18.59 14.6 12.33 16.85 19.38 11.57 54.21 30 18.1 13.83 18.44 9.18 26.63 18.26 31.54

558 688 (24.75%) 43.6 61 (36.01%) 25.1 28.4 (12.25%) 27.9 35.7 (28.19%) 31.4 40.5 (26.96%) 76.25 99 (29.07%) 4.78 7.1 (46.39%) 10.8 16.88 (53.73%) 89.1 114 (27.52%) 46 61.2 (30.21%) 5.75 7.9 (38.60%) 17.1 27.45 (61.47%) 1600 1670 (4.31%) 92.45 100.5 (7.83%) 168 179.5 (9.79%) 37 50 (35.14%) 106.5 139.5 (31.11%) 3.09 4.31 (39.48%) 268.8 397 (46.60%) 4.77 6.33 (30.52%) 31.6 41.4 (32.48%) 13.48 16.3 (22.56%) 10.5 19.76 (90.37%) 21 26.9 (28.10%) 241 305.8 (23.91%) 725 970.4 (32.93%) 84.95 125 (50.42%) 16 21.9 (35.69%) 2946 3290 (11.90%) 116.3 132.6 (13.24%)

Aboitiz Equity Ventures, Inc. Alliance Global Group, Inc. Ayala Land, Inc. Aboitiz Power Corporation BDO Unibank, Inc. Belle Corporation Bloomberry Resorts Corporation Bank of the Philippine Islands DMCI Holdings, Inc. Energy Development Corporation First Gen Corporation Globe Telecom, Inc. Int'l Container Terminal Services, Inc. Jollibee Foods Corporation JG Summit Holdings, Inc. Metropolitan Bank and Trust Company Megaworld Corporation Manila Electric Company Metro Pacific Investments Corporation Manila Water Company, Inc. Petron Corporation Philex Mining Corporation Robinson Land Corporation Semirara Mining Corporation SM Investments Corporation San Miguel Corporation SM Prime Holdings, Inc. Phil. Long Distance Telephone Co. Universal Robina Corporation

Blue Chips of the Philippines

ALI AP BDO BEL BLOOM BPI DMC EDC FGEN GLO ICT JFC JGS MBT MEG MER MPI MWC PCOR PX RLC SCC SM SMC SMPH TEL URC

What sets the prices on a stock exchange?


Market forces changes stock prices every day. Share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply) the price goes up. If more people want to sell than buy, the price goes down.

What makes people want to buy one stock and not another?
The price of a stock indicates what investors feel a company is worth.
The most important factor that affects the value of a company is its earnings. Earnings are the profit a company makes. Public companies must report their earnings on a quarterly basis. If a company has done well, the stock price will likely rise. If not, it will drop.

What else might influence the price of a stock?


Often times current world events have an impact on the price of stocks.
For example, after 9/11, aviation stocks decreased in value. This was in anticipation of a drop in traveling by the consumer and thus a decrease in profits. This caused a lot of trouble for those companies.

What about all these animals?

The Bull a bull market is when the economy is doing well, the GDP is growing and stock prices are rising. The bull market charges ahead.
The Bear a bear market is when the economy is bad, recession is looming and stock prices are falling. A bear market hibernates and moves slowly.

What about all these animals?

The Chickens chickens are afraid to lose anything. They invest in safe things like bonds or mutual funds.
The Pigs pigs are high-risk investors. They want to make a killing in a short time. Unfortunately, they are usually led to the slaughter.

Thank You!

By: April Alfonso