GAMESTOP PART 1
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, Background: Option: right to buy or sell a share of stock at a set price
(Set price = exercise price)
Two types
- Call option: "long"
You can BUY at a set exercise price
You believe share price will increase
Sometimes part of employment package
- Put option: "short"
You can SELL at a set exercise price
You believe share price will decrease
Short selling: like a "put" option. You are borrowing a share of stock that
you sell then buy back later to make the books balance
10K in Jan - 115K today
Liquidity ratios
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measure how well a firm can cover their bills
Equity
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An ownership claim in the issuer.
Five basic characteristics:
- Ownership (proportional to equity given)
- Voting rights - whoever has the most shares controls the board
- Variable dividend - could be cash or more shares
, - Residual claim - last in line for payment
- Pre-emptive rights - the right to buy/participate in any new share offering
T/F: From a finance perspective, we consider shareholder equity as reported on the
balance sheet as a more useful measure of value than market capitalization.
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False
Market cap = value w/ most accurate & current share price @ the present
The balance sheet is less accurate because it shows historical values
Firms raise capital with either
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Debt or Equity
Debt - agreement between borrower and lender to repay principal w
interest on the loan (fixed income security)
(EXTERNAL)
Equity - or common stock or shares is an ownership claim in the issuer
(variable income security) (dividends as cash or shares, no required PMT,
pre-emptive rights think Facebook 30% to .3%) (FUNDS ASSETS
INTERNALLY)
T/F: Suppose that Moody's changes the credit rating for Big Cat Fireworks from BBB
to BB. We would expect the price of Big Cat bonds to increase.
, Give this one a try later!
False.
Their credit worthiness rating has gone down, meaning that they are less
likely to pay back their creditors. therefore, their stock price would go
DOWN
Historical rate of return for a stock formula (MEMORIZE THIS)
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r = (P1 + D1) - P0 / P0
new price + new dividend - old price / old price
Current liabilities are usually
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a/p
n/p
N
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Give this one a try later!
, Background: Option: right to buy or sell a share of stock at a set price
(Set price = exercise price)
Two types
- Call option: "long"
You can BUY at a set exercise price
You believe share price will increase
Sometimes part of employment package
- Put option: "short"
You can SELL at a set exercise price
You believe share price will decrease
Short selling: like a "put" option. You are borrowing a share of stock that
you sell then buy back later to make the books balance
10K in Jan - 115K today
Liquidity ratios
Give this one a try later!
measure how well a firm can cover their bills
Equity
Give this one a try later!
An ownership claim in the issuer.
Five basic characteristics:
- Ownership (proportional to equity given)
- Voting rights - whoever has the most shares controls the board
- Variable dividend - could be cash or more shares
, - Residual claim - last in line for payment
- Pre-emptive rights - the right to buy/participate in any new share offering
T/F: From a finance perspective, we consider shareholder equity as reported on the
balance sheet as a more useful measure of value than market capitalization.
Give this one a try later!
False
Market cap = value w/ most accurate & current share price @ the present
The balance sheet is less accurate because it shows historical values
Firms raise capital with either
Give this one a try later!
Debt or Equity
Debt - agreement between borrower and lender to repay principal w
interest on the loan (fixed income security)
(EXTERNAL)
Equity - or common stock or shares is an ownership claim in the issuer
(variable income security) (dividends as cash or shares, no required PMT,
pre-emptive rights think Facebook 30% to .3%) (FUNDS ASSETS
INTERNALLY)
T/F: Suppose that Moody's changes the credit rating for Big Cat Fireworks from BBB
to BB. We would expect the price of Big Cat bonds to increase.
, Give this one a try later!
False.
Their credit worthiness rating has gone down, meaning that they are less
likely to pay back their creditors. therefore, their stock price would go
DOWN
Historical rate of return for a stock formula (MEMORIZE THIS)
Give this one a try later!
r = (P1 + D1) - P0 / P0
new price + new dividend - old price / old price
Current liabilities are usually
Give this one a try later!
a/p
n/p
N
Give this one a try later!
