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NOTES: Introduction to Stocks and the Stock Market

• Stocks are a share of OWNERSHIP in a company.

• When you own something, you can enjoy the BENEFITS of what you own.

• One benefit of owning STOCK in a company is that you are entitled to receive some of the PROFIT that company makes.

• However, when you invest in the stock market, you take a big RISK , which is the chance of LOSING MONEY .

• You can become a part owner of a company if you buy STOCK in that company. But many other people will also have bought STOCK in that company. So you are then only one of many people who SHARE its ownership. That is why when you buy stock in a company, you buy something called SHARES .

• When you buy SHARES OF STOCK in a company, you own a little piece of EVERY part of the company. Therefore, if you bought stock in McDonald’s, you would not only own 1/694 millionth of every hamburger, you would also own 1/694 millionth of the company’s BUILDINGS , STOVES , and FURNITURE .

• Each SHARE of stock you own entitles you to one vote for the company’s top managers, or directors. These managers run the company for you, so you do not have a big influence on what the company does or sells.

• Why would a company want to join the stock market in the first place? What would be the advantages of selling shares of ownership in a company?

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* When a company sells STOCK it takes in more REVENUE than it would have had it not sold shares of STOCK . The company can then put that MONEY back into improving the business by building more FACTORIES , improving its TECHNOLOGY , or creating and selling new PRODUCTS .

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Stocks and the Stock Market

Directions: Decide whether the following statements are true or false. If the statement is false, please explain why on the lines below the statement. If the statement is true, you do not need to write anything.

1. True or False? It is possible to speak with the owner of McDonald’s.

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2. True or False? If you buy stock in McDonald’s you can eat there for free.

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3. True or False? Buying stock in McDonald’s involves taking a risk.

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4. True or False? If you own McDonald’s stock you can decide what they serve on their menu.

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5. True or False? You own stock in McDonald’s. Including you, there are 226,656 owners of

McDonalds. McDonald’s makes 226,656 hamburgers. Therefore, you own one hamburger.

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6. True or False? There are 226,656 owners of McDonald’s. That means there are 226,656

McDonald’s restaurants in the world.

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7. True or False? McDonald’s has close to 694 million shares of stock. There are 226,656 owners of

McDonald’s. That means that each owner owns about 3,062 shares of stock.

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