V' STOCKS

1
V. STOCKS
2
G. The Value of a Stock

• Pricing depends upon supply and demand
• Return on Investment
• Price appreciation (capital gain) or depreciation
  (capital loss) is generally the primary component
  of stock gains or losses
• Return also includes dividends
• Dividends are declared by corporate boards of
  directors, and paid quarterly payable to
  holders of the stock as of the declaration date
• Ex-Dividend the period between the declaration
  and the payment date shares purchased when a
  stock is ex-dividend do not have a right to
  receive dividend payments

3
G. The Value of a Stock (Continued)

• 2. b. iii. stock price generally increases by
• the dividend amount until the ex dividend
• date is reached, then falls by the amount of
• the dividend after the record date (dividends
• are declared, and an ex-dividend date is set.
• Once the ex-dividend date has been set,
• payments are made to the holder of record
• as of the record date generally 2 business
• days before the ex-dividend date)
• iv. Special Dividend used to
• distribute excess cash to
• shareholders ex. MSFT 3.00/share
  dividend in 2004
• (normal was 0.32/share)

4
G. The Value of a Stock (Continued)

• c. Total return Sale Price Purchase Price
  Dividends
• Purchase Price
• ex. Stock purchased at 10 per share, sold
  _at_ 15 per
• share, received 0.50 per share in dividends
• ex. - Stock purchased at 10 per share, sold
  _at_ 9 per
• share, received 0.50 in dividends
• ex. - Stock purchased at 20 per share, sold _at_
  21 per
• share, received 0.75 in dividends

5
G. The Value of a Stock (Continued)

• Factors Influencing Stock Price
• Stocks climb when the overall market is strong,
  when the companys products or services are in
  demand, and when profits are rising
• Stock prices fall when the market is weak,
  competitors threaten market share, and when
  profits fall http//us.rd.yahoo.com/finance/chart
  /range/2y/http/finance.yahoo.com/q/bc?sIARt2y
  lonzmqlc
• http//us.rd.yahoo.com/finance/chart/range/2y/ht
  tp/finance.yahoo.com/q/bc?sXOMt2ylonzmql
  c

6
G. The Value of a Stock (Continued)
7
G. The Value of a Stock (Continued)

• If the company is out of favor with investors,
  has serious management problems, or is losing
  market share, price can fall quickly
• Moving Average shows the overall trend in a
  stocks price, smoothing day to day variations
  the moving average rolls over time takes into
  account different beginning and ending periods
  every day