Science,
Industry and Business Library
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Evaluating
Companies
Evaluating Stock Performance
Understanding Stock Information
Using Analysts' Reports
Assessment
Understanding
Stock Information
How can I understand current stock information?
Understanding stock
information is a full-time job for many people -- it's certainly
a subject too complex for us to cover fully here. We'll briefly
look at some very basic terminology and point to some useful online
resources for those who want to become more expert in following
-- or perhaps even predicting -- the ups and downs of the stock
market.
What is a stock?
A stock is the piece of a publicly held company that investors buy
when they invest in that company. Stocks, which are traded on the
stock
exchange, are also referred to as equities, shares, and securities
(hence the SEC
-- Securities and Exchange Commission -- that you learned about
in Module 3).
The stocks that most people have are, appropriately, called common
stocks. These are distinguished from preferred stocks. Preferred
stocks often confer benefits such as fixed dividends, and, in the
event of company liquidation or bankruptcy, preferred stock holders
are paid off before common stock holders.
For more information on how stocks work, go to:
http://www.investopedia.com/university/stocks
What are bonds?
A bond
represents an amount of money that investors essentially lend to
a company. When investors buy bonds, they are lending the company
an amount of money to be repaid within a fixed amount of time and
at a fixed rate of interest.
There are many different types of bonds, issued by organizations
ranging from publicly held companies to the United States Federal
Government. Bonds issued by publicly held companies are referred
to as corporate bonds.
For more information on how bonds work, go to:
http://www.investopedia.com/university/bonds/bonds1.asp
What are indices?
An index
is a statistical or numerical measure of the average performance
-- changes both up and down -- of a group of stocks.
There are many, many stock indices for different segments of the
financial market, from indices for the national stock exchanges
of different countries to indices for different types of investment
(such as bonds). Some of the best-known indices are the Standard
& Poor's 500 (The S&P500) -- an index of the stocks of the 500
largest companies in the United States; the Dow Jones Industrial
Average -- an index of a wide variety of companies, all of which
have yearly sales of over $7 billion; and the NASDAQ (National Association
of Securities Dealers Automated Quotation System) composite index,
comprised of such high-tech stocks as Microsoft.
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