LEVEL 1 GLOSSARY
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Bonds
When you buy bonds, you're basically lending money to municipalities, states, and other government entities, which they use for construction projects and other fun stuff. They then pay you back with interest. These aren’t the biggest money makers, but bonds are fairly stable for those of you who think “risk” is a dirty word.
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NASDAQ
It's known as The National Association of Securities Dealers Automated Quotation System, but suffice to say this stock exchange is one of the biggies.
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Return
Gain (or loss) from an investment. Unless you're fiscally masochistic, you're going to cross your fingers for a gain.
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Revenue
The money generated from sales. If you own a lemonade stand and charge 25 cents per cup, add up all the sales for the day and—voila!—that's the revenue (just to keep you on your toes, sometimes people just refer to this as sales).
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Stock
This is your piece of the corporate pie, and it entitles the holder to a share of assets and earnings.
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Bull Market
Like a bull charging forward, a “bull market” is typically a market on the upswing. Olé!
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Debt
It's a bad word in personal finance, but it's pretty common in the corporate world. This is the money that a company owes to a lender.
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Dow Jones Industrial Average
The grandaddy of them all when it comes to indices only because it’s the oldest and most popular—not the largest or most representative. The Dow only represents the prices of 30 largest and most widely held companies in the U.S.
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IPO
Short for Initial Public Offering, this is a private company's way of saying, "Do you want a piece of this?" This is when a company offers shares to the public to get more dough to grow the business. Also known as "going public."
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NYSE
The New York Stock Exchange, a.k.a. Wall Street, is where stocks are bought and sold.
See full glossary
In Level 1 we'll introduce you to some of the basic concepts of investing. Each concept features a brief description and a case study, so you can see how each concept works in what financial analysts call "the real world." When you've mastered a concept, click the link at the bottom of the page to add it to your Report Card and move to the next one. Master all the concepts in each level, and then take the quiz to see just how smart you are.
- What is money?
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The uses of money
- Function of a bank
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What is a company?
- Is that company any good?
- How companies make money
- Brands
- Stocks vs. bonds
- What is a stock?
- Compounding interest
- What is the market?
- LEVEL 1 QUIZ
What is a company?
What we'll learn:
1) What is a company? (Sounds basic, but stick with us, OK?)
2) What is the difference between private and publicly traded companies?
3) What is an IPO?
So here's the thing about WeSeed: In the end, we're all about the companies. We talk about the shoes we like, who's behind our favorite new blockbuster movie, and things like that.
But our bottom line is to teach people that the stock market is made up of the publicly traded companies that produce those shoes or that movie. That's what makes up the market — companies that people run across every day.
But first, let's take a step back. What is a company? Could it be a lemonade stand? Yes. Could it be a mega-gazillion dollar enterprise like Microsoft (MSFT)? Yes, again.
A company is any entity — anything from small businesses to partnerships and corporations — that makes a service or good that the maker can sell for money. Simple.
Here's the less-than-simple part: Some companies are public. Some are private. So what the heck is the difference?
For starters, private businesses usually only have a few owners. If one of the few owners wants to sell his portion of the company, he will probably negotiate with the other owners, and that's a private transaction.
As a company gets more and more owners, there are more and more transactions, so there needs to be a place to meet. This is called an exchange.
Companies that have many owners list on an exchange to allow owners to transfer their interests freely. In this way, publicly traded companies are not that different from private companies, except that the public company allows its interests to be traded on a national exchange.
Public companies put portions of their company up for sale on the exchange in the form of shares for you and me to buy. That's called an IPO.
Got it? Good. But you should also know what an IPO is: It's an Initial Public Offering. In other words, it's the first time that shares of a company are being sold to a large group of investors.
Before that, if you have fewer than 500 investors, you have the right to remain private. But once you have more than 500 investors, you actually need to list the shares. In other words, you need to give those people the ability to buy and sell shares freely without the company's involvement.
That's a federally mandated rule. So an IPO is that time when a company decides they are willing to have more shareholders.
Let's use the lemonade stand as an example. The more people who'd like to partner with your lemonade venture the better, because those partners are buying a portion of the company, and that money helps the company do more business.
But once your Lemons 'R Us company gets to a certain number of people, the government says: "You don't have the right to be private anymore — you need to be public." So we as lemonade-stand owners say, "Great, we are going to now list our shares on an exchange so anybody can buy or sell them."
And that's where the adventure begins.
Three Facts to Wow Your Friends at a Party
1) The first company to ever go public was the Dutch East India Company in 1601. You remember them from history class, don't you?
2) One quick way to compare companies is by their market cap. Stock price x amount of shares = market cap. This gives you a rough idea of how big a company is.
3) The sum total of all the world's publicly traded companies is just over $40 trillion.
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