The Language of Stock The Language of Stock

Market InvestingMarket InvestingMarket InvestingMarket Investing

Financial Terms

Definition of Stock

Financial Terms

� There are a couple of terms commonly used

by investors, financial advisors, stock market

analysts, and financial experts that YOU need

to know.

� It is critical that you understand basic stock � It is critical that you understand basic stock

market terminology , in order for you to

understand the stock market.

� THIS IS THE FIRST STEP IN UNDERSTANDING

THE STOCK MARKET.

Basic Terms You Should Know:

� Common Stock

� Shares

� Equity or Equity

Interest

� Ownership or

Ownership Interest

� Stake or Ownership

Stake

COMMON

STOCK

� There are different terms that are

synonymous with the word stock:

• Common Stock

• Shares

• Equity or Equity Interest

Other Names for Stock:

• Equity or Equity Interest

• Ownership or Ownership Interest

• Stake

SHARES

� If you say:

Shares

“I have 200 shares in Apple Computer.”

� It’s the same as saying:

“I own 200 shares of Apple Computer Stock.”

EQUITY OR

EQUITY

INTEREST

� If you say:

Equity

“After looking at my statement, I realized that I

have a 25% equity position in this company.”

� It’s the same as saying:

“I own 25% of all stock outstanding in this company.

So if a company has a 1000 shares (common stock)

out there I own 250 out of the 1000 shares of stock.”

OWNERSHIP

OR

OWNERSHIP

INTERESTINTEREST

� If you say:

Ownership

"I have a 20% ownership interest in this company

and I'll be damned if you close that

factory down."

� It’s the same as saying:

“I own 20% of all stock outstanding in this company.”

STAKE OR

OWNERSHIP

STAKE

• If you say:

• It’s the same as saying:

Stake

“I have a 50% stake in Microsoft.”

IF THIS WERE TRUE I WOULD BE WEALTHIER THAN BILL

GATES. DID YOU KNOW THAT BILL GATES DOESN’T EVEN

OWN 50% OF MICROSOFT SHARES OR COMMON STOCK

OUTSTANDING?

This simply means that I own 50% of all stock

outstanding of the Microsoft Company.

Note:

� Notice that all of these words mean the

same thing.

� They are just different terms.� They are just different terms.

� Stock is synonymous with shares, equity, and

ownership. Companies issue stock to raise

money for operations. In exchange, companies

give up ownership to stockholders. People

purchase stock as an investment in

In Summary:

purchase stock as an investment in

corporation in exchange for the opportunity to

receive capital gains and dividend income.

Stockholders are considered owners of the

corporation.