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Module 5
What Makes A Good Stock?
Picking a good stock involves taking the time to research a company and understand its financials in order for investors to gain insight into a company's health.
In this module, we examine the long-term potential of a company by looking at factors such as competitive advantages, industry trends & technology shifts.
Module At A Glance
Grade Levels:
8th - 12th
Est. Length:
2-5+ Hours (26 slides)
Activities:
4 Activites
Articles:
6 Articles
Languages:
English & Spanish
Curriculum Fit:
Math, Business, Economics, CTE, Social Studies
Standards Alignment:
CEE National Standards, Jump$tart National Standards & Relevant State Standards
Guiding Questions
- What are dividends and why would a company issue them?
- Why do investors want to own companies that pay dividends?
- What types of companies pay dividends and why?
- What are some of the quantitative and qualitative ways to analyze different investments?
- How does a P/E ratio help you determine the value of a company’s stock?
Enduring Understandings
- Dividends are divisions of profit between stockholders.
- Qualitatively and quantitatively analyze a company and determine if it fits in your investment criteria.
- P/E ratios are used to compare companies in similar industries to determine future performance.
- Calculating a P/E ratio, ROE, and D/E ratio and what these different ratios actually mean.
Module Vocab & Key Topics
Stock
A share of a company which is sold to investors and represents ownership in the underlying company.
Revenue
Income generated from selling goods and services. These returns are from normal business operations so it does not include windfall gains or tax credits.
Earnings
Returns from a company’s activities after expenses have been subtracted. This may or may not include tax expense depending on the context.
Dividends
A portion of a company's earnings distributed to its shareholders, typically paid in cash, but can also be in the form of additional shares of stock.
Dividend Yield
Dividend Yield is a financial ratio that shows how much a company returns in dividends each year relative to its share price.
Blue Chip Stocks
Blue Chip stocks are well- established, large companies with a history of stable earnings. These companies often pay regular and growing dividends, providing a steady stream of income.
Growth Stocks
Growth stocks are shares in high-growth companies, which typically reinvest their profits back into their business, rather than pay dividends.
Penny Stocks
Penny stocks are very low-priced shares of small, often speculative companies. These stocks rarely pay dividends, as these companies need to reinvest any profits to fuel growth.
Price-to-Earnings (PE) Ratio
A ratio used to value companies which measures current share price against per share earnings to help determine if a company is over or undervalued.
Return On Equity (ROE)
This percentage is calculated by dividing the shareholder's equity held in a company by the company's net income for the past year, helping providing an indicator of financial performance and profitability.
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The information contained on this website and from any communication related to this website is for information purposes only. Rapunzl Investments LLC (Rapunzl) does not hold itself out as providing any legal, financial or other advice. Rapunzl also does not make any recommendation or endorsement as to any investment, advisor or other service or product or to any material submitted by third parties or linked to this website. In addition, Rapunzl does not offer any advice regarding the nature, potential value or suitability of any particular investment, security or investment strategy. The material on this website does not constitute advice and you should not rely on any material in this website to make (or refrain from making) any decision or take (or refrain from making) any action. All investment, borrowing or tax decisions should be made with the advice of an appropriately qualified and licensed advisor.
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