DR - Zakaria Hegazy: Investment Lecture 2

Slide 1
Module Code: BFIN04H02

Title: Investment
Lecture: 3 (Markets and Transactions)
By: Dr. Zakaria Hegazy, CT
Dr.Zakaria Hegazy, CT
Slide 2
Today’s Overview
 9:00 Revision of the previous lecture
 9:10
 10:00 Break (10 minutes)
 10:10
 11:00 office hours (2hrs)
 1:00
 2:00
 4:00 End of the day
Slide 3
Markets and Transactions

 Learning Goals
1. Identify the basic types of securities markets and
describe the IPO process.
2. Explain the characteristics of broker markets.
3. Understand dealer markets, alternative trading

systems, and the general conditions of securities
markets.
Slide 4
Markets and Transactions

 Learning Goals (cont’d)
4. Review the key aspects of global securities markets,
including the risks associated with foreign
investments.
5. Discuss trading hours and regulation of
securities markets.
6. Explain long purchases, margin transactions and short
sales.
Slide 5
Contents
√ 9:00
 9:10
 10:00 Break (10 minutes)
 10:10
 11:00 office hours (2hrs)
 1:00
Slide 6
10 minutes workshop
 Look at the following picture.
 Discuss with your group the mechanism of trading in
the financial market.
 One of your group presents the results.
Slide 7
Buying and selling in the stock market
Slide 8
Explain The Stock Market Terms found on

quotation pages
Slide 9
A: is???????????????????????????????
Slide 10
A: This is the Ticker Symbol. Every company, when listed, will be assigned a
ticker symbol. In ABC Ltd's case, it has been assigned ABCC.
Slide 11
B……………………………………………………….
Slide 12
B: This is the Market Price of the latest transaction. When the market is
closed, this number shows the last transacted price of that particular
day known as the closing price.
Slide 13
B: This is the Market Price of the latest transaction. When the market is
closed, this number shows the last transacted price of that particular
day known as the closing price.
Slide 14
C:
Slide 15
C: This shows how much the price has changed relative to last session's
closing price. On this particular day, the price of ABCC's shares dropped by
$1.12 from last session's closing price of $58.44 ("E")
Slide 16
C: This shows how much the price has changed relative to last
session's closing price. On this particular day, the price of WMT
unchanged
Slide 17
D:
Slide 18
D: This is the amount in C as a percentage of the last closing price

("E") i.e. 1.12/58.44 x 100% = 1.92%.
Slide 19
D: This is the amount in C as a percentage of the last

closing price ("E") unchanged for WMT
Slide 20
E:
Slide 21
E: This is ABCC's last market sessions's closing price or $58.44.
Slide 22
E: This is WMT’s last market sessions's closing price or $54.43.
Slide 23
F:
Slide 24
F: This is the volume or the number of pieces of shares that

changed hands on this particular trading session. During this
session, 9.81 million ABCC shares were bought and sold.
Slide 25
F: This is the volume or the number of pieces of shares that

changed hands on this particular trading session. During this
session, no WMT shares were bought or sold.
Slide 26
G:
Slide 27
G: The bid refers to the price offered by a potential buyer. The bid
volume refers to the number of shares that potential buyers want
to purchase at this price.
Slide 28
G: The bid refers to the price offered by a potential buyer. The bid
volume refers to the number of shares that potential buyers want
to purchase at this price.
Slide 29
H:
Slide 30
H: The ask refers to the price that a potential seller would like to sell the stock
for. The ask volume refers to the number of shares that potential sellers want
to sell at this price.
Slide 31
H: The ask refers to the price that a potential seller would like to sell the stock
for. The ask volume refers to the number of shares that potential sellers want
to sell at this price.
Slide 32
The Bid-Ask spread is ……………
Slide 33
The Bid-Ask spread is the difference between the bid price and
ask price. If the bid price is $55 and the ask price is $54, the bid-
ask spread is $1.
Slide 34
I: ……………………………………………………
Slide 35
I: The 52-week high/low is the highest price and the lowest price
that the stock price has reached in the immediate preceding 52
weeks i.e. the year-to-date. So in the past 52 weeks, the highest
price that ABCC has reached was $63.69 and the lowest was
$46.64.
Slide 36
I: The 52-week high/low is the highest price and the lowest price
that the stock price has reached in the immediate preceding 52
weeks i.e. the year-to-date. So in the past 52 weeks, the highest
price that WMT has reached was $63.85 and the lowest was
$42.50.
Slide 37
J:
Slide 38
J: The charts give you a pictorial representation of historical price

trends. MSN moneycentral provides a useful tool: you can choose
how far back you want the chart to go.
Slide 39
J: The charts give you a pictorial representation of

historical price trends.
Slide 40
K:
Slide 41
K: A dividend is a payment of cash by the company to its shareholders. The dividend shows the
last annual dividend paid, in this case, ABCC paid each common shareholder $1.50 of cash per
share. The yield expresses this amount as a percentage of the closing price. In this case, it is
roughly $1.50/$57.32 x 100% = 2.57%.
Slide 42
K: A dividend is a payment of cash by the company to its shareholders. The dividend shows the
last annual dividend paid, in this case, WMT paid each common shareholder $0.95 of cash per
share. The yield expresses this amount as a percentage of the closing price. In this case, it is
roughly $0.95/$54.43 x 100% = 1.77%.
Slide 43
L:
Slide 44
L: This is the all important earnings per share or EPS. In this case,
ABCC's profit for the year allocated to each share results in $2.19 a
share. This earnings belong to shareholder. It is either paid out to
the shareholder as a cash dividend or reinvested into the
business.
Slide 45
L: This is the all important earnings per share or EPS. In this case, WMT's profit
for the year allocated to each share results in $3.36 a share.
Slide 46
M:
Slide 47
M: The Historical Price-Earnings Ratio or P/E ratio tells you how

much you are paying for each dollar of this year's earnings at the
current share price. In this case, the P/E ratio is calculated:
$57.32/$2.19("L") and yields approximately 26. It is an indication
that you are probably paying about $26.00 per dollar of earnings
that the company managed to earn in the past year.
Slide 48
M: The Historical Price-Earnings Ratio or P/E ratio tells you how

much you are paying for each dollar of this year's earnings at the
current share price. In this case, the P/E ratio is calculated:
$54.43/$3.36("L") and yields approximately 16.10. It is an
indication that you are probably paying about $16.10 per dollar of
earnings that the company managed to earn in the past year.
Slide 49
N:
Slide 50
N: The Forward P/E is slightly different from "M" because it is based

on the analysts' forecast of the coming year's EPS. In this case, the
analysts expect that ABCC will earn $3.39 per share and therefore
yield a forward P/E of 16.90. Therefore, if you paid $57.32 for ABCC's
shares in this market, it is an indication that you are probably paying
about $16.90 for each dollar of expected earnings. Note that this is
just a forecast. Many things can happen between now and the future
that cause the business to either overperform or underperform
expectations.
Slide 51
N: The Forward P/E is slightly different from "M" because it is based

on the analysts' forecast of the coming year's EPS. In this case, the
analysts expect that WMT will earn $3.53 per share and therefore
yield a forward P/E of 15.40. Therefore, if you paid $54.43 for WMT
shares in this market, it is an indication that you are probably paying
about $15.40 for each dollar of expected earnings.
Slide 52
O:
Slide 53
O: This is the total number of shares of common stock issued by

the company and currently in the hands of investors. To calculate
EPS ("L"), the total profit is divided by "O". So ABCC has a total of
1.13 billion shares of common stock currently outstanding.
Slide 54
O: WMT has a total of 3.93 billion shares of common stock

currently outstanding.
Slide 55
P:
Slide 56
P: The market capitalization or "Market Cap" is the total market

value of a company. It is given by the current stock price ($57.32)
multiplied by the total number of shares outstanding ("O" - 1.13
billion shares) to give $64.97 billion (allowance for rounding).
Slide 57
P: The market capitalization or "Market Cap" is the total market

value of a company. It is given by the current stock price ($54.43)
multiplied by the total number of shares outstanding ("O" – 3.93
billion shares) to give $214.13 billion (allowance for rounding).
Slide 58
Viola! Now you know how to read the quotation tables on MSN
moneycentral and your newspaper! That's a lot of stock market
terms eh? Let's take a look at more stock market terms used.
Slide 59
10 minutes
http://www.beginner-stock-investing.com/stock-market-terms.html
Slide 60
Other Commonly Used Stock

Market Terms
 People often use stock market terms that seem strange to non-investors. Here are some of these
stock market terms.
 Bull Market: A bull market is one where stock prices have been showing a rising trend and is
expected to keep rising. Market participants are usually optimistic.
 Bear Market: This is the opposite of a bull market; a bear market is one where there is a
sustained stock price decrease and is expected to keep falling. Market participants are usually
pessimistic.
 Fundamental Analysis: The process of selecting stocks by looking at the financial position,
profitability and economic strength of the underlying business. It usually involves the analysis
of the business and its financial statements before concluding if the business represents a good
purchase relative to the price paid. This is a business-like approach and is the main focus
of this website.
 Technical Analysis: The study of past price movements and buy-sell volume of a stock, using
it as a basis to predict future short to medium term price movements. The speculator then tries
to profit from such predictions. I personally do not think Technical Analysis has any merit
and it will not be presented on this website.
 "Long": When a person says he is "going long" on a stock, he is positioned such that he profits
when the stock's price increases.
 "Short": When a person says he is "going short", he profits when the stock's price falls. People
usually short a stock by borrowing shares of stock from a brokerage firm and selling them first
(say at $50). They profit when the price of the stock falls as they buy them back at lower prices
(say $45) to return the borrowed shares of stock to the brokerage firm, making the difference
($5 profit).
Slide 61
Have a nice break,

we will start the
class after 2 hours
Slide 62
Now I know:
 Short term vehicles include:
 T…b…
 C…..D….
 D…. A…
 S…..EE s…..B….
 M….M….M…F…
 C……p……which include: D…., Ch….,CDs and P….N…
 C……..St……….
 F….I…..S…. Which include: B….., P…s…, and C…S…
 M….f….
 De……….which include: o….. And F….
 Short-term investment are important for L……..
 There are 7 st….for in….
Slide 63
Afternoon Review
Slide 64
Thanks for your Great Effort Today!

Next week lecture :
– Identify the basic types of securities
markets and describe the IPO process.
– Explain the characteristics of broker
markets.
– Understand dealer markets, alternative
trading systems, and the general
conditions of securities markets.
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Slide 1

Module Code: BFIN04H02

Markets and Transactions

3. Understand dealer markets, alternative trading

Markets and Transactions

Buying and selling in the stock market

Explain The Stock Market Terms found on

D: This is the amount in C as a percentage of the last closing price

D: This is the amount in C as a percentage of the last

E: This is ABCC's last market sessions's closing price or $58.44.

E: This is WMT’s last market sessions's closing price or $54.43.

F: This is the volume or the number of pieces of shares that

F: This is the volume or the number of pieces of shares that

The Bid-Ask spread is ……………

J: The charts give you a pictorial representation of historical price

J: The charts give you a pictorial representation of

M: The Historical Price-Earnings Ratio or P/E ratio tells you how

M: The Historical Price-Earnings Ratio or P/E ratio tells you how

N: The Forward P/E is slightly different from "M" because it is based

N: The Forward P/E is slightly different from "M" because it is based

O: This is the total number of shares of common stock issued by

O: WMT has a total of 3.93 billion shares of common stock

P: The market capitalization or "Market Cap" is the total market

P: The market capitalization or "Market Cap" is the total market

Other Commonly Used Stock

Have a nice break,

Thanks for your Great Effort Today!

Evaluation of the day

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