So Good Candy Bars

Situation: Expanding beyond limited one-room store Options:

1. Business loan- sole proprietor Risk???

2. Partnership Risk???

3. Incorporation SGCB Inc.

Financial Advisor: decided on common vs. preferred stock• MAINTAINED MAJORITY OWNERSHIP• OFFERED STOCK ON NYSE, NASDAQ OR AMEX• DATE TO LAUNCH IPO

Corporations

Advantages

1. Limited personal liability

2. experienced management and specialized workers

ImmortalityEase in raising

financial capital

Disadvantages

Higher taxes- must pay corporate taxes

Greater governmental regulation

Lack of secrecy-ImpersonalRigidity

CH 8

Essential Goal: Acquire a basic understanding of stock and the stock market and their roles in the economy

Objectives: Students will be able to… 1. define stock 2. explain the differences between preferred and common stock Define an IPO Describe the benefits of buying stock as an individual investor Describe the circumstances surrounding the origins of the stock

exchanges List and describe the differences between the NYSE, NASDAQ

and others Describe the purpose of a stock index Identify and describe two well known stock indices

WENDY’s

Dave Thomas Enters the Restaurant Business: 1956 The Wendy's chain was created by R. David "Dave" Thomas, who credited part of his success to his challenging

youth. Thomas was born during the depths of the Great Depression in Atlantic City, New Jersey. His early life was punctuated by tragedy. Abandoned at birth, he was adopted by a Michigan couple, Rex and Auleva Thomas. Auleva died when Dave was five years old, and his father was forced to move from state to state seeking work as a handyman. Rex remarried three times and moved his family ten times over the next eight years.

Dave Thomas entered the world of work at the age of 12, delivering groceries in Knoxville, Tennessee. He lied about his age to circumvent child labor laws, and worked 12-hour shifts to keep his job. Thomas's adulthood began early. When he was 15, his family moved to Fort Wayne, Indiana, and he started work as a busboy at a local restaurant, the Hobby House. When his family announced another move, Thomas elected to set out on his own, taking a room at the local YMCA. As his work began to demand more time than his education, Thomas gave up on the latter, leaving school after the tenth grade and later enlisting in the army. (Decades later, Thomas would return to high school, receiving his GED in 1993.) Trained as a cook in the military, he returned to a job behind the grill of the Hobby House, where he met Lorraine, a waitress--and his future wife.

Thomas entered the restaurant business in earnest in 1956 in partnership with Phil Clauss. Just a few years later, Thomas and Clauss met Colonel Harland Sanders, who offered them Kentucky Fried Chicken (KFC) franchises. Clauss purchased one for Fort Wayne, and the pair broke into the chicken business.

By 1962 Clauss was deep into KFC--he owned four unprofitable franchises in Columbus, Ohio, and needed someone to turn them around. If Thomas could turn the stores' $200,000 deficit into a profit, Clauss promised him a 45 percent share of the Columbus franchises. Against the advice of Colonel Sanders, who had become a mentor, Thomas took the challenge. He cut the menu from 100 items down to just a few--Thomas urged the Colonel to concentrate on chicken alone--improved the chicken "bucket," bartered radio advertising with buckets of chicken, invented KFC's spinning bucket sign, and built four additional locations in less than six years. His earnest, imaginative work paid off; Thomas was promoted to regional operations director of KFC and sold his stake in the Columbus restaurants for $1.5 million in 1968, thereby reaching millionaire status by the age of 35.

Wendy’s

Wendy's Born in 1969 Thomas parlayed his windfall into a new venture named after his

eight-year-old daughter Melinda Lou, or Wendy, as her brothers and sisters nicknamed her. The first restaurant, which opened on November 15, 1969, was located on Broad Street in downtown Columbus, Ohio. Its menu featured made-to-order hamburgers, "secret recipe" chili, french fries, soft drinks, and the Frosty frozen dessert. Thomas kept the menu simple to save labor costs, remembering his KFC experience. The Wendy's Old Fashioned Hamburgers decor differed from other fast-food joints that abounded with easy-clean vinyl and tiled surfaces. Instead, Thomas put in tiffany-style lamps, bentwood chairs, carpeting, and tabletops embellished with vintage newspaper advertisements. Although his ideas were refreshingly original, some industry experts criticized Thomas's use of expensive fresh beef and noted that the fast-food industry seemed overcrowded. With all the criticism, Thomas hoped only for a local chain that would provide his children with summer jobs.

Wendy’s

Wendy's International, Inc. is the operator, developer, and franchiser of the Wendy's restaurant chain, which is the number three hamburger chain in the United States (with a market share of 12.7 percent in 2000), trailing McDonald's (43.1 percent) and Burger King (18.8 percent).

Stock

Stock- own shares or portions of a corporation See Cartoon

Shareholders- can cast votes on decisions Board of Directors proposes at periodic shareholder meetings. See Apple Shareholders Meeting

Majority Owner- over 50% of stockStock Certificate- once given to verify

ownership of stock but printed no longer

Types of Stock

Common Stock: own all of the company’s profits but paid out last, after employees, debt, purchase of needed assets etc. then common stockholders Dividends: a distribution of a portion of the

company’s profits.Preferred Stock: receive dividends BEFORE

common stockholders.

How to Buy and Sell- Process not Science

Process: Contact stockbroker who work for you for a

commission They contact floortrader, physically present to

negotaite trade with another floortrader representing a buyer/seller

Transaction price appears on ticker tape (now electronic)

Good Stocks 2012

Potash CorpAppleVisaIntelBaiduExcelon

Benefits of Investing

Two reasons: 1. make a profit 2. receive dividend payments

General rule to make a profit-? Buy low and sell high

SGCB Incorp. Seeks to Sell Stock- but how?

Process: 1. Register with a stock exchange (like NYSE) 2. Arrange for sale of stock through investment bank

3. Schedule a sale of a certain quantity of stock through an initial public offering (IPO)

Benefit- I gain access to capital but retain majority ownership

Origins of the Stock Market

Stock is like any commodity to be bought or sold at market

Stock Markets formed like any other market based on two shared qualities: those who wish to buy and sell come together price reflects what consumers are willing to pay

Rollercoaster Bad news, economic insecurity etc. can cause a decrease in

demand which drops price or the inverse occurs High, Low, Last Bull Market-rising and investors buying Bear Market-falling and investors selling

Types of Markets

Differ by reputation but same purpose- buy and sell stock

New York Stock Exchange (NYSE)-most well known and reputable in the world. Based on history, location and the corporations it lists. Status booster for listed stocks.

Types of Markets

National Association of Securities Dealers Automated Quotations (NASDAQ)- functions without a physical location, called over-the-counter trading. Trades posted to electronic networks

Others: regional and international stock markets

Stock Indices

Problem: difficult to determine trends within industries

Solution: group together stocks of certain industrial categories and report the behavior (trends) of prices within these categories.

Publish: indices that serve as economic indicators

Stock Indices

Dow Jones Industrial Average (DJIA) A stock index published by an investment company Tracks 30 representative stocks- reflects the health of the American

economy. Quoted by media outlets. See DJIA online

Created by Charles Dow (1896)- also created the Wall Street Journal based on honest reporting of economic news

Standard and Poor’s 500 (S&P 500)- Reports on 500 stocks for a broader view Tracks industrial and service related industries

Section 8C Objectives

Explain the three benefits of the stock market to the overall economy

Describe the circumstances leading to the 1929 crash

Define speculation and speculative bubbleDescribe the purpose and function of the SEC

Why are Stock Markets important to the Economy?

1. Corporations can raise much needed capital

2. Opportunity for individuals to invest Stock portfolio: a collection of stocks from different

individual corporations. High, moderate or low risk diversification

Younger usually high risk, older usually low risk Mutual funds: privately managed stock portfolios-

often seen as safer, part of a retirement package3. Information about the state of the nation’s

economy

Circumstances behind the Crash of 1920

Run away speculation Speculation: actively buying and selling stock to take

advantage of short term price changes, a bit like gamblingSpeculative Bubble: stock prices rose above true

value of the corporation b/c of people’s expectations which like a bubble can grow with increased expectations, 1929 bubble burst.

Black Tuesday- mass week of selling culminated on Oct. 29, 1929- one of greatest one-day losses

Led to the Great Depression, bank runs, massive unemployment and a disruption to the circular flow model

SEC: purpose and founding

Securities Exchange Commission (SEC)- founded as part of the New Deal reforms. A regulatory agency. Purpose to ensure accurate and current reporting of

information to the public or face investigations and fines.

Prevents investments made in ignorance and ensures regulations are met.

Example: Bernie Madoff Ponzi Scheme

Is the Stock Market a venue Christians should pursue?

Approach: Gambler: motivated by greed Investor: motivated by investment potential (how could

it be used?)Ownership:

Gambler: does not own Investor: partial owner of a company and invested in its

growth and healthRisk:

Gambler: high stakes games, great risks Investor: careful research and consideration lessens risk

Scriptural References for your consideration: Stewardship- Prov. 3:11, Matt. 25:27 (talents) Covetousness- Deut. 5:21, Col. 3:5, 1 Tim. 6:9 Love for God over money- Matt 6:24 Love for others- Matt. 22: 39

Is the Stock Market a venue Christians should pursue?

Conclusion

Review Activity