Stocks and Stock Investment Concepts

These flashcards cover key concepts related to stocks, including definitions, valuation methods, types, and characteristics.

What do stocks represent in a company?

Stocks represent ownership in a company.

What are dividends?

Dividends are payments made to shareholders from a company's earnings.

What is the relationship between dividends and stock valuation?

If the value of future dividends is larger than the market price, the stock is undervalued; if smaller, it is overvalued.

What is the intrinsic value of a stock?

Intrinsic value is calculated using the Dividend Discount Model, which considers future dividends and their present value.

How often do most publicly traded stocks pay dividends?

Most publicly traded stocks pay dividends quarterly (four times per year).

What type of stock has voting rights and a possible dividend?

Common stock has voting rights and a possible dividend.

What type of stock has a fixed dividend but no voting rights?

Preferred stock has a fixed dividend and no voting rights.

What is a large-cap stock?

A large-cap stock refers to companies with a high market capitalization.

How do stocks compare to bonds in terms of liquidity?

Stocks tend to be more liquid than bonds, making them easier to trade.

What indicates a stock might be undervalued?

When the value of future dividends is larger than the market price.