The Stock Market The stock market appears in

The Stock Market

The stock market appears in the news every day: It is the organised trading of securities (a general name for shares or bonds of all types); it is a market in which the shares of corpoartions are traded l A company can raise money on the stock market (or stock exchange) in two different ways l It can issue shares (stocks), or units of its capital, to institutional investors or the general public l Different types of shares or equities are available, but the most common are known as ordinary or common shares l

When an investor buys a share, using the services of a specialist company or broker (a person who is licensed to act as an agent for another in negotiating the sale, purchase of real property in return for a fee or commission), he or she becomes a shareholder and owns a part of a company l Shareholders can make money by receiving dividends (an amount paid to shareholders from a company’s aftertax earnings), paid as a proportion of a company’s annual profits, and when the value of their shares increases l Another way is the following: a company can also borrow money from investors by issuing bonds, loans for fixed period with fixed interest rates l

Securities refer to both shares and bonds ( a written agreement by which a person insures he will pay a certain sum of money if he doesn’t perform certain duties properly) l Each year billions of shares and bonds are sold or traded on the world’s major stock exchanges l Many companies are authorised to use the stock exchange to trade their shares. l Every day, the press gives prices and other information about the shares of these listed companies l

How does the stock market work? Let’s say you want to start a business, and you decide to open a restaurant. You buy a building, buy all the kitchen equipment, tables and chairs, supplies, you hire the cooks, servers. . l Let’s say that: you spend 500 000 dollars buying the building and the equipment l In the first year, you spend 250 000 on supplies, food and payment for employees l At the end of your first year, you add up all of the money and your total income is 300 000 dollars. l

Since you have made 300 000 dollars and paid out the 250 000 for expenses, your profit is 50 000 l At the end of the second year, you bring in 325 000 and your expenses reduce the profit to 75 000 dollars. At this point, you decide that you want to sell the business. What is it worth? l One way to look at it is to say that the business is “worth” 500 000 dollars. l

l If you sell the building, the equipment and everything else: the building probaly went up in value but the equipment went down because it is now used. Let’s say that the total value of you business is 500 000. this is the asset value, or book value, that is the price of the business if you sold it right now. l But what if you keep it going?

If you keep the restaurant going, it will probably make at least 75 000 dollars a year, you know that from your history with the business l Knowing this you can set the price according to the profit forecast and even divide the restaurant in 10 equal pieces and sell each piece to a different person. l In other words, you sell shares in the restaurant. So, each shareholder would earn only a tenth of the profits and an equal part in business decisions. l

l Stock represents ownership of a company’s profits. A dividend on a share of stock represents that share’s portion of profits, generally dispersed yearly.

A stock exchange An example: if I am a private citizen who owns a restaurant, and I am selling my restaurant to other private citizens in the community, I might do the whole transaction by placing an ad in the newspaper l This makes selling the stock an easy job and the stock exchange solves the problem. l The exchange makes buying and selling easy. You don’t have to actually go to New York to visit the New York Stock Exchange. You can call a broker and he or she will go to the NYSE on your behalf. l

The stock exchange has an interesting side effect. Becuase all the buying is concentrated in one place, it allows the price of a stock to be known every day. Therefore, the investors can watch as a stock’s price fluctuates. l The price of a stock also reflects the dividend that the stock pays, the profit of the company in the future and many useful information. l

Phrasal verbs The third conditional

Phrasal verbs: do the matching to obtain meaningful phrasal verbs l l l l Point Think Call (2) Go Buy Look Let l l l l Out Over Off Up On About Down After

Replace the words in italics with the correct phrasal verbs: The meeting has been cancelled because several people are unable to attend. 2) We already own 30% of the company’s shares and we intend to purchase at least another 20% in the coming year. 3) The new subsidiary in Bahrain will be supervising our operations in the Middle East. 4) It will be a difficult conference to organise. How shall we start doing it? 1)

5) We’ll need some more time to reflect upon your proposal before we can give you an answer. 6) In her presentation she drew attention to some of the problems that the new project would involve. 7) One of our sales representatives will visit you next week. 8) This year the company has disappointed investors by announcing an unexpected loss.

The third conditional l We use third conditional to talk about actions or events which did not happen in the past, and the imaginary consequences. l FORM: past perfect + seconditional (had gone)(would/could have earned) l If you had bought those shares, you would have made a lot of money.

l The employees would not have gone on strike if the company had improved their pension scheme. l You would have been much happier if you had married Sarah instead of Ann.

Complete with the correct third conditional verb solutions: The Macintosh presonal computer_____ (not provide) the solution for inexpensive publishing, if Apple _____ (not introduce) the Laser. Writer, the first affordable laser printer for the Mac. l Apple probably ____ (remain) more competitive if they _____ (sell) licences for their operating system to other computer manufacturers. l

l If the first generation of the Newton, a revolutionary notepad computer, ______ (work) better, sales _____ (be) higher. l When the i. Mac was launched, people loved the colourful, fun design. Perhaps if it ______ (be) less attractive, fewer first-time computer buyers ____ (buy) it.

l If Apple _____ (not launch) the i. Mac, they _______ (not recapture) 6. 7% of the computer market. l Apple shares _____ (not rise) in 1998, if their sales ____ (not increase) substantially.