Page 139 - CalcBus_Flipbook

CH 18] Calculating Business 18-3

The purchasers of IPO’s generally purchase in lots of millions of dollars, and then will go
back into the market and resell them to other buyers wanting to have ownership in the
company. This reselling in a secondary market is handled through the major stock
exchanges. It is in the secondary market where a stock’s market price is established
dependent upon demand for the stock. The funds from the IPO sale go to the issuing company.
The purchasing funds in the secondary market transactions go to those current owners of the
stock and not to the issuing company as with the IPO. Companies establish a maximum
number of shares that they will issue, and sell only a partial amount which allows them to go
back into the secondary market and sell stock they retained or allow current stock holders to
purchase stock directly from them and avoid purchasing through a stock broker.
To have their money working for them, most people regard securities (stocks and bonds)
as a good form of investment. As a result, millions of shares are bought and sold every day.
Table 18.1 indicates, for those stocks listed, the volume of shares sold. This is a listing in
1000’s which means that when the volume number is stated you add three zeros (000) to the
end of the number to have a better approximation of the number sold. For AT&T, Inc., under Par value: The face
Volume (1000’s) the number is 18,196. This is actually a rounded number, but for reporting value of the security.

purposes represents 18,196,000 shares of stock that were traded on the day of the listing. Market value: The
Many American corporations have hundreds of thousands of owners, which are shareowners amount for which
and those shareowners own millions of shares of stock. Once a company goes public it is something can be sold
changing from one owner or a few owners to literally thousands of owners. Their ownership is on a given market.
represented by the stock they purchased and these new owners consist of individuals, other
companies and investment houses, along with retirement funds, all of whom purchase
ownership with the intent of increasing wealth. Retirement funds invest in stocks to be able to
provide for retirees when they are no longer able to work through the sharing of profits
(dividends) received and market value change.
Buying shares of stock in a company is buying part of the ownership of that company. The
selling company establishes a par value for the stock which is the value of the stock on their
books. The price paid for the stock is the market value, which is not the same as the stock’s
par value.

How To Read A Stock Ticker

Watch any business or financial news program on network television and a flashing series
of letters, arrows and numbers trail across the TV screen. This ticker tape, aka ticker, tracks
the activity of certain stocks. It does appear cryptic but it tells the reader about the stocks and
the stock markets. How are these tickers read, deciphered and used to advantage?

Figure 18.1 shows a typical ticker tape. This one is for Microsoft.

Figure 18.1 Ticker tape with symbols as seen on a screen

Ticker Symbol: The unique characters used to identify the company. MSFT
Shares Traded: The volume for the trade being quoted. Abbreviations are K=1,000,
M= 1 million and B = 1 billion. 6K = 6,000
Price Traded: The price per share for the particular trade (the last bid price). @
131.68
Change Directions: Shows whether the stock is trading higher or lower than the previous
day’s closing price. ▼price change is lower. ▲price change is higher.
18
Change Amount: The difference in price from the previous day’s close. 0.61

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