Learning about BusinessBuying Stocks and Bonds
Business Vocabulary: Do you know what these words mean?
bondbusiness expenses companydividendloaninvestinginvestorsinterestU.S. Savings Bond profitrisksalaryshareholdersharesstockthe Stock Market
In 2012, Craig and Omar were broke. They needed to earn money.They decided to sell lemonade.
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They made up a name for their lemonade company.
They called it LeM
They made up a business plan.
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1. COMPANY--business
LeMo
They needed a lot of things.
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Some things they already had.
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They needed to buy other things…
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2. BUSINESS EXPENSES--things you buy for your business
…but they had no money to buy what they needed.
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Craig told his friend, Maggie, he needed money for LeM .Maggie said, “Do you want a loan? I will lend you and Omar $100. Pay me back later.”
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Craig told his friend, Maggie, he needed money for LeM .Maggie said, “Do you want a loan? I will lend you and Omar $100. Pay me back later.”
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3. LOAN--money you borrow
Craig told his friend, Maggie, he needed money for LeM .Maggie said, “Do you want a loan? I will lend you and Omar $100. Pay me back later.”
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3. LOAN--money you borrow
After Maggie loaned Craig and Omar the money, they gave her a paper called an IOU. They wrote on the paper, “Next year, we will pay back Maggie $100 plus 10% interest.”
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L
LeM Bond Certificate $110 for Dynell Bennett
Another name for an I.O.U. is a bond.Next year, Maggie will earn an extra $10 when he ‘cashes in’ his bond for LeMo.
interest = extra money. Charli & Sergei will pay interest because Dynell helped them when they needed money.
4. INTEREST--extra money
Dynell paid $100 for the bond, but next year, he will get back $110.
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Dynell paid $100 for this LeMoo Bond Certificate. After 1 year, it will be worth $110.
Lending money to a business is called ‘buying a bond.
When you buy a bond from a business, the business promises to pay you back with interest after a certain time.
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LeMo Bond Certificate $110
5. BOND--money you loan to a business
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Piggy Bank v. Bond Certificate
2011 2012 2011 2012
$100 $100 $100 $110
LeMo Bond Certificate $110
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People like to give U.S. Savings Bonds to babies. This U.S. Savings Bond costs $50.The U.S. government promises to pay you back $50 + interest.After 20 years, when the baby is in college, the bond will be worth $100.
Buying a bond is a way to save and earn money.When you buy a bond, you are lending someone money. They promise to pay you back the money plus interest.
6. U.S. SAVINGS BOND--money you loan to the United States government that pays you interest.
Craig and Omar needed more money.Craig talked to his friend, Anwar. She read Craig and Omar’s business plan.
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Anwar offered them $50 for their business.She said, “Don’t pay me back. I think you have a great idea and a good plan. Instead of paying me, let me be your business partner.”
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Craig and Omar thought having a business partner was a good idea.Craig wrote on a paper: “LeM establishes 100 shares of stock. “We sell Anwar 50 shares of LeMo stock. ”
Huh?What is stock??What are shares?
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Craig and Omar thought having a business partner was a good idea.Craig wrote on a paper: “LeM establishes 100 shares of stock. “We sell Anwar 50 shares of LeMo stock. ”
Huh?What is stock??What are shares?
Suppose LeM was a pie.
Suppose LeMo was a very large pie cut into 100 slices.
Each slice is a share.
The pie is LeM stock.
7. STOCK--money in a business
Suppose LeMo was a very large pie cut into 100 slices.
The pie is LeM stock.
Craig and Omar own the other 50 shares.
8. SHARE--a piece of a business
Maresangely paid for 50 shares.
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Maresangely paid $50 for shares in LeMoo Stock. If LeMo makes profits, Maresangely will earn money because she is a shareholder.
L LeMo
Stock Certificate 50 Shares
9. SHAREHOLDER or STOCKHOLDER--a person who owns a part of a business and shares profits.
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L LeMo
Stock Certificate 50 Shares
10. RISK--you may win or you may lose.
Anwar accepts a risk.LeM does not promise to pay her money.When Anwar became a shareholder, she may earn money or she may lose money.
Anwar thought investing in LeMoo was a good risk.
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People love LeMo. .Craig’s and Omar’s business is successful!They sell a lot of lemonade and their business earns a lot of money.
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After one year, LeMo earned $500.
They cannot keep all of the money. Craig and Omar must pay business expenses.
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$500 = total earnings, 2010 – 2011. 150 = buying lemons, paper cups, stand
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Craig ($50) & Omar ($50) for working.
11. SALARY--paycheck for working at your job
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Craig ($50) & Omar ($50)
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Craig ($50) & Omar ($50)
250
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Craig ($50) & Omar ($50)
250 -110 = Maggie's Bond (+ interest)
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Craig ($50) & Omar ($50)
250 -110 = Maggie’s Bond (+ interest)
140
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Craig ($50) & Omar ($50)
250 -110 = Maggie’s Bond
140 PROFIT
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Kenya ($50) & Charli ($50)
250 -110 = Dynell’s Bond
$140 PROFIT
Craig & Omar together own 50 shares.Together, they earned $70; each earned $35.00
Anwar owns 50 shares.She earned $70.00. Craig & Omar must pay Anwar her share in the profit.
$35$70
12. PROFIT --extra money you earn after paying business expenses
$35
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$500 = total earnings, 2010 – 2011. - 150 = buying lemons, paper cups, stand
350- 100 = salary for Kenya ($50) & Charli ($50)
250 -110 = Dynell’s Bond
$140 PROFIT
The money you earn from investing in business is called a dividend.
$70 $70
13. DIVIDEND--business profits shareholders (investors) earn
Anwar kept her dividend.
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Craig and Omar used their dividend for their business.
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Business earnings go up and down.
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Some businesses are not successful.Business owners and stockholders may lose their money.
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Businesses are successful when they find out what customers want.Businesses must always make changes to match their customers needs.
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Anwar was very happy that she earned a dividend.She became interested in investing more money in business.
14. INVESTING--buying something now that will earn more money in the future.http://www.google.com/imgres?imgurl=http://unexpectedprofits.com/wp-content/uploads/2010/09/Knowing-where-to-invest-your-money-will-benefit-your-business.jpg&imgrefurl=http://unexpectedprofits.com/better-investments/where-
to-reinvest-unexpected-profit-for-maximum-results/attachment/knowing-where-to-invest-your-money-will-benefit-your-business/&usg=__SoLTGjHbqyAK7xHsYnmZPBvdmhE=&h=418&w=586&sz=39&hl=en&start=5&zoom=1&tbnid=L1tQ5vnr_7x46M:&tbnh=96&tbnw=135&ei=G_OJTfOAKJKztwfHj_jcDQ&prev=/images%3Fq%3Dinvest%26um%3D1%26hl%3Den%26safe%3Dactive%26client%3Dfirefox-a%26sa%3DN%26rls%3Dorg.mozilla:en-US:official%26biw%3D1141%26bih%3D561%26tbs%3Disch:1&um=1&itbs=1
http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgA house is a very good investment.Most of the time, you pay a low price for a house.After many years, the house is worth more money
chttp://www.zoomstart.com/buy-low-sell-high/
$100,000
How much you paid for the house in 2011.
How much you earned selling the house in 2021.
$165,000
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The Stock Market is where people buy and sell business shares.
15. THE STOCK MARKET--where people buy and sell shares in business
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The New York Stock Exchange on Wall Street in New York City.
http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgThe goal of investors: Buy low, sell high.
chttp://www.zoomstart.com/buy-low-sell-high/16. INVESTORS--people who buy stocks, bonds, houses and other things that will be worth more money in the future.
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Investors must be careful about making decisions.
He just lost a lot of money.
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Investors must learn about the business and understand the risks.
http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgIf a business is successful, investors can earn a lot of money.
http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpgIf a business is not successful, investors can lose a lot of money.
If you can wait a long time, many investments increase their value.
If you can wait a long time, many investments increase their value.
Business Vocabularybond –lend money, then earn back the money plus interestbusiness expenses –things you must buy for your business company –a businessdividend – business profits shareholders (investors) earnloan –money you lend a person or a company. They will pay it back.interest –extra money you earn from saving or lending.investing –buying something that will earn more money in the future.investors –people who buy stocks, bonds, houses & other things that will be worth more money in the future.U.S. Savings Bond –money you lend the government.profit –extra money you earn after you pay business expenses.risk --you may win or you may losesalary –money you earn from workingshareholder – a business partnershares –pieces of a businessstock –money in a businessthe Stock Market –a place to buy and sell business shares
Finis