Finance Chapter 8 Test 2 Start

Test 2 financ e chapte

25 cards   |   Total Attempts: 182
  

Cards In This Set

Front Back
Shareholders own company
Stocks
Issued in small denominations and large number of shares outstanding
Stocks
Stock holders are _____ ______
Residual claimants
Paid last; not sure how much return will be
Residual claimants
Stock holders have _______ liability
Limited
With limited liability, max amount the stock holder can lose is __________ ________.
Initial investment
2 main ways to measure stock market
Dow jones industrial average standard and poors composite 500
Price weighted average
Dow jones
Value weighted
Stsandard and poors composite 500
Over 5000 companies
Nasdaq composite
Most broadly based index
Wilshire 5000
Uses of stock market index
1. provides measure of overall market performance 2. provides benchmark against which to measure performance of indiv stocks and investment strategies
Why do stocks have value? 2 reasons
1. b/c they pay dividends 2. b/c they will rise in value and create capital gains
Why are stocks risky?
B/c stockholeders are residual claimants
WRITE DOWN EQUATIONS
Div discount model ; impact of risk