hw check. vocabulary, mk p 82 1 cash flow 2 equity 3 mutual funds 4 pension funds 5 principal 6...
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HW check
Vocabulary, MK p 82
1 cash flow 2 equity
3 mutual funds 4 pension funds
5 principal 6 maturity
7 coupon 8 insolvent or bankrupt
9 creditors 10 dividends
11 market makers 12 bid / bid price
13 offer / offer price 14 yield
Match up verbs with nouns
borrow money deduct interest payments
finance activities issue shares
issue bonds pay (a rate of) interest
pay a (higher) return pay dividends
pay tax receive interest payments
raise money repay principal sell assets
deduct tax receive dividends repay bonds
repay money sell bonds
HW check: MK, p 81
• Meaning of T-notes, T-bonds and gilts?
• Who are market makers?
• Bid vs. offer price?
• What is a spread?
• What is inversely related?
• What does the yield of a bond depend on?
More about bonds (MK, p.81)• Meaning of T-notes, T-bonds and gilts?Treasury notes, treasury bonds and gilt-e_____ stock (UK)dged
SECURITIES*: BONDS (U16) DEBT FINANCINGDEBT FINANCING ( = ( = loans)
Risk rating: AAA (best) to C (worst)
Companies:
BONDSan interest paying
loan
which can be traded
on bond markets
securities, papers
* vrijednosnice
Governments:
LONG-TERM BONDS:
GILTS – GB
TREASURY BONDS-USA
T-bonds (10+ yrs)
TREASURY NOTES-USA
T-notes (less than 10 yrs) SHORT-TERM BONDS:
TREASURY BILLS (one-year)
More about bonds (MK, p.81)• Meaning of T-notes, T-bonds and gilts?Treasury notes, treasury bonds and gilt-e_____ stock (UK)• Who are market makers?Banks & b________ companies which q____ bid and offer price.• Bid vs. offer price?_____ – the highest price that the buyer is willing to pay
_____ – the price asked by sellers• What is a spread?D________ between the bid & offer prices (bid/ask or buy/sell)• What is inversely related?I_____ r____ in the economy & the price of existing bonds.• What is the yield of a bond and what does it depend on?I______ given by a bond. It depends on its c______ and its
purchase price.
dged
rokerage uote
Bid
Offer
ifference
nterest ate
ncome oupon
More about bonds (MK, p.81)• Meaning of T-notes, T-bonds and gilts?Treasury notes, treasury bonds and gilt-edged stock (UK)• Who are market makers?Banks & brokerage companies which quote bid and offer price.• Bid vs. offer price?Bid – the highest price that the buyer is willing to payOffer – the price asked by sellers• What is a spread?Difference between the bid & offer prices (bid/ask or buy/sell)• What is inversely related?Interest rates in the economy & the price of existing bonds.WHY?• What is the yield of a bond and what does it depend on?Income given by a bond. It depends on its coupon and its
purchase price.
Debt Finance vs. Equity Finance(MK, p.81)
BONDS FOR INVESTORS FOR ISSUERS
ADVANTAGE
DISADVANTAGE
Debt Finance vs. Equity Finance(MK, p.81)
BONDS FOR INVESTORS FOR ISSUERS
ADVANTAGE
DISADVANTAGE
generally safer
shares pay a higher return
bond interest is tax deductibleWHAT DOES IT MEAN?
debt increases a company’s financial riskHOW?
Comprehension CHECK, MK p 82
1 F Can you explain your answer?
2 T
3 T
4 F
5 T
6 F
7 F
8 F
Words/expressions to remember?
issue, mature, insolvent, coupon, tax advantages
Stocks vs. Bonds (video) HANDOUThttp://www.investopedia.com/video/play/stocks-versus-bonds
Stocks and bonds are the two biggest c____________ of most p_________... Stocks usually provide a l____-t____ g_____ and bonds tend to ensure a s_____ i______ s_____.... Bonds can be bought from l____ and n_______ g__________ and m_____ c__________, and a careful selection of stocks will include both l______ and s_____ c___________ from a d______ group of i_________. A combination of stocks and bonds is good for all kinds of investors.
omponents ortfoliosong erm rowthteady ncome tream
ocal ational
overnments ajor orporations
arge mall ompaniesiverse ndustries
Stocks vs. Bonds (video), cont.
For aggressive investors who want g_________, bonds may b______ the risk of stocks and stabilize the u____ and d_____ of the market, while stocks can help r___ a_____ investors h____ against the risk of inflation. Thus, stock purchases will provide high reward and help to hedge against inflation while bonds give you a dependable s_____ n___ against stock market losses.
rowth
alance
ps owns
isk verseedge
afety et
REVISION
FOUR TYPES OF ORGANISATIONS IN THE PRIVATE SECTOR
1) WITH UNLIMITED LIABILITY• __________________• ______________
2) WITH LIMITED LIABILITY• ___________________• ___________________
Sole proprietorship
Partnership
Private limited company
Public limited company
REVISION LIMITED vs. UNLIMITED
LIABILITY FOR DEBT
In businesses with limited liability, owners are responsible* for their company’s debts up to a certain amount if it goes out of business, and do not have to sell their personal assets to repay the debts.
* ______
Source: Longman Business English Dictionary
liable
LIMITED COMPANIES
• a legal ______ (independent legal existence from its
shareholders)
• shareholders have limited liability (liable for the
amount of capital ________)
• in case of bankruptcy, assets are __________ and
the company is wound up.
entity
invested
liquidated
LIMITED COMPANIES• owners put ___ the capital (divided into shares) • shareholders can _______the AGM and take a
share of the profit through dividend• shareholders elect a _______________ and a
Chairperson• the BoD ________managers to run day-to-day
business• documents which need to be ________ : the
Memorandum of Association and Articles of Association
• Registrar of Companies issues a Certificate of Incorporation
up
vote at
Board of Directors
appoint
drawn up
SynonymsBritish EnglishBritish English
companies
shares/stock EQUITIES
shareholders
ordinary shares
preference shares
flotation
Annual General Meeting
Articles of Association
Memorandum of Assoc.
authorised share capital
property
American EnglishAmerican English
corporations
stocks
stockholders
common stock
preferred stock
initial public offering
Annual Stockholders M.
Bylaws
Certificate of Incorporation
authorized capital stock
real estate
STOCKS
• Securities*:
- Stocks – equity financing
- Bonds – debt financing
- money market instruments:
• (derivatives, futures, options)
- * vrijednosnice, vrijednosni papiri
MK, p 87: Reading Stocks and Shares1J 2D 3A 4F 5G
6C 7K 8E 9I 10H11L 12 B
Handout: STOCKS & SHARES (1)
1. Most companies begin as ……………. limited companies.
2. If they want to grow / expand they must ………. capital.
3. One way to obtain capital for growth is to ……….. , i.e. apply to the stock exchange to become a public limited comp.
4. Smaller or newer companies usually sell their shares on the ………….……. markets.
private
raise
go public
over-the-counter
STOCKS & SHARES (2)5. Issuing shares for the first time is known as
………… a company (making a …….........) or _ _ _.
6. To guarantee to purchase all the securities at an agreed price on a certain day, if they cannot be sold to the public: ……………....
7. After stocks have been issued they can be traded on the .................... market at the stock exchange on which the company is ..................
8. The .............. value of a share – the price written on it – is rarely the same as its market price.
floating flotation
I P O
to underwrite
secondarylisted
nominal
A period in which most stocks fall in value is called a ............ market, and the period during with most stocks (& the stock .........) are rising is called a ......... market.
bearindex bull
Handout: match phrases with the same meaning
Issuing stocks and offering them for sale
To underwrite a stock issue
Equity
Market makers
How many sellers and buyers there are
The price a stock is currently being traded at on the s.e.
A period during which stocks are rising
Bear market
A period during which stocks are falling
Supply and demand
Market price
Bull market
Traders in stock who quote bid & offer prices
To guarantee to buy the stocks if there are no other buyers
Stocks or shares
Going public
Vocabulary: match phrases with the same meaning
Issuing stocks and offering them for sale
To underwrite a stock issue
Equity
Market makers
How many sellers and buyers there are
The price a stock is currently being traded at on the s.e.
A period during which stocks are rising
Bear market
Going public
To guarantee to buy the stocks if there are no other buyers
Stocks or shares
Traders in stock who quote bid & offer prices
Supply and demand
Market price
Bull market
A period during which stocks are falling
HW: RB, p 79
VI Write a summary (200-300 words) of the text based on the notes above