Stock Market Basics Quiz

Stockholders' Returns

• Stockholders can earn a return through dividends, which are portions of the company's profit distributed to shareholders.
• Stockholders can also earn a return through capital appreciation, which is the increase in value of their shares over time.

Types of Stocks

• The main difference between common stock and preferred stock is that preferred stock has a higher claim on assets and earnings, and its dividends are fixed and must be paid before common shareholders receive any dividends.
• Preferred stock has a characteristic of fixed dividend payments, which are paid before common shareholders receive any dividends.

Organized Exchanges

• A critical feature of well-developed and efficient stock markets is the presence of organized exchanges, which facilitate the trading of securities.
• Organized exchanges began trading stocks in the 17th century in Amsterdam.
• The idea of a specific trading location has been replaced by electronic communication networks (ECNs), which have increased efficiency and reduced costs.

Stockholder Claims

• Stockholders have a claim on both residual income and assets, meaning they are entitled to a share of the company's profits and assets.

Organized Exchanges Function

• The main function of organized exchanges is to provide a platform for buyers and sellers to trade securities.

NYSE Volume

• The New York Stock Exchange (NYSE) has a daily volume of hundreds of millions of shares.

Evolution of Trading

• Electronic communication networks (ECNs) have replaced the idea of a specific trading location for organized exchanges.