Stock (business)

INTRODUCTION
Stock (business), in business and finance, a share of ownership in a corporation. Shares in a corporation can be bought and sold, usually on a public stock exchange. Consequently, the owner of shares can realize a profit or capital gain if the stock is sold at a price above what the owner originally paid for it.

Some companies enable stockholders to share in the profits of the company. These payments of corporate profits to stockholders are called dividends. In addition to having a claim on company profits, stockholders are entitled to share in the sale of the company if it is dissolved. They may also vote in person or by proxy on a variety of corporate matters, including the most important matter of who should run the corporation. When the company issues new stock, stockholders have priority to buy a certain number of shares before they are offered for public sale. Stockholders also receive periodic reports, usually quarterly, that provide information regarding the corporation’s business performance. Stocks generally are negotiable, which means stockholders have the right to assign or transfer their shares to another individual.

A stockholder is considered a business owner and has the protection of limited liability under United States laws. Limited liability means that a stockholder is not personally liable for the debts of the corporation. The most a stockholder can lose if the company fails is the amount of his or her investment—what he or she originally paid for the stock. This arrangement differs from that of other forms of business organization, which are known as sole proprietorships and partnerships. These business owners are personally liable for the debts of their businesses.

WHY CORPORATIONS ISSUE STOCK

Corporations issue stock in order to finance their business activities. This method of raising funds is only available to business firms organized as corporations; it is not available to sole proprietorships and partnerships. The corporation can use the proceeds of a stock offering in a variety of ways. Depending on the type of company, this might involve increasing research and development operations, purchasing new equipment, opening new facilities or improving old ones, or hiring new employees.

An alternative to stock financing is debt financing or the sale of bonds, an interest-bearing loan. This alternative is also available to sole proprietorships and partnerships. With the issuance of a bond a company typically promises to make periodic interest payments to the lender or bondholder as well as pay back the amount of the bond when the term of the bond expires. Thus bonds are evidence of loans while stocks are evidence of ownership. Stocks and bonds are collectively known as securities.

When a corporation first makes stock available for public purchase, it works with an investment banking firm to arrange an initial public offering (IPO). The investment bank acquires the first issue of stocks from the corporation at a negotiated price, and then makes the shares available for sale to its clients and other investors. Corporations that have IPOs are usually young companies in need of large amounts of capital.

A corporation can only have one IPO—the first time it makes stock available to the public. After its IPO, a company is said to be public. Public corporations that need additional financing for further business development may choose to issue more stock at a later time. This is called a subsequent, or follow-on, offering.

Some corporations may choose not to go public. In this case it is said to be a privately held corporation. A corporation may elect to remain private because it does not want to share its profits, or it may not want to relinquish control to shareholders.

Most of the information reported in the daily news media about the buying and selling of stock refers to transactions involving previously issued stock. The daily buying and selling of stock rarely involves IPOs. Almost all stock transactions are “second-hand transactions.” The corporation that initially issued the stock is not directly involved.

A corporation’s capitalized value refers to the market value of the stock that it has issued and that remains outstanding—that is, available for sale or purchase. A corporation’s capitalized value may be greater or less than its book value. Book value is the value of the corporation’s assets as reflected in its accounting statements—that is, on its books. Capitalized value may also be greater or less than the corporation’s replacement value, the amount that it would take to replace all of the corporation’s assets.

Corporations will sometimes split their stock. This means the corporation replaces outstanding shares with new shares on some multiple basis, such as a two-for-one or three-for-one split. When a corporation splits its stock, it does not obtain any new funding. Splits usually occur when the market price of shares is deemed too high by corporate management. With a split the price of shares falls, making purchase by smaller investors more affordable. Keeping a stock relatively affordable for smaller investors makes it easier for a corporation to raise money with a follow-on stock offering.

WHY PEOPLE BUY STOCK???

Economic gain represents the primary motive for the purchase of stock. The gain or return from stock consists of two parts: dividends, the periodic payments made from profits, and appreciation, the capital gain realized from selling a stock for more than its purchase price.

An investor really has only two choices in acquiring the financial assets of a corporation—buying stocks or bonds. As a financial claim against a company, bonds take precedence over all types of stock. Thus, they are a safer investment than stocks, especially in times of deflation (a period when the prices of goods and services are generally falling). Stocks, however, are usually the better investment during periods of inflation (a period when the prices of goods and services are generally rising) because they represent ownership of assets that will probably rise in value as fast as or faster than prices in general. Because the dollar value of bonds is fixed, they cannot serve as a hedge or protection against inflation as do common stocks.

THE LANGUAGE OF STOCKS

People who invest in stocks or follow the progress of the stock market encounter a wide variety of terms unique to these investments. These terms include price-to-earnings ratio, earnings per share, market capitalization, mutual fund, bull market, bear market, and day trading, among others. Understanding this vocabulary helps explain many of the workings of the market in stocks.

Price-to-Earnings Ratio and Earnings Per Share

Investors use several techniques to determine whether a particular stock should be purchased. Some investors examine a stock’s fundamentals such as its earnings per share or its price-to-earnings ratio. Earnings per share is calculated by dividing the corporation’s total earnings or income by the number of shares the corporation has outstanding. A corporation’s price-earnings ratio is calculated by dividing the current price of a share of the company’s stock by its earnings per share. These calculations represent fundamentals in the sense that they reflect the effectiveness of a company’s business operation (earnings per share) and the market’s current assessment of the company’s worth in relation to its earnings (price-earnings ratio).

In making a decision to buy or sell a particular stock, expectations are formed regarding future fundamentals. If expectations about the corporation’s operations improve and investors expect higher earnings per share, then the price of the stock is likely to rise. Investors expect that more people will want to buy shares to participate in the increased profitability. If, however, expectations turn pessimistic and shareholders anticipate lower earnings per share, then holders of the stock will try to sell their shares, reducing the stock’s price.


Mutual Fund
Investors can own stock in two different ways. The first is direct ownership, in which investors add a corporation’s stock to their personal portfolio or account. The second type of ownership is indirect and involves participation in a mutual fund. A mutual fund is operated by a management-investment company that combines the money of its shareholders and invests that money in a wide variety of stocks. A mutual fund is thought to be safer because it is diversified. Diversification means that shareholders are less likely to lose their investment because the risk is spread among the stocks of many corporations rather than just a few. Investors add the stock of the mutual fund to their personal accounts. However, the mutual fund has direct ownership of the corporations’ stocks.


Bull Market, Bear Market
Bull market is a term applied to a period when stock prices on average experience a sustained increase. During a bull market investors are optimistic about future business conditions and expect corporate profits to rise. So they will want to acquire stock to participate in the expected higher profits. A bear market describes the opposite situation, when stock prices on average experience a sustained decrease. Pessimism regarding the economic future dominates investor thinking during a bear market.

The most recent bull market extended from 1990 to early 2000 when the market value of the outstanding shares of domestically issued stock rose from $3.5 trillion to $19.6 trillion. During the bear market that followed, the market value of these stocks fell from their high point to $13.3 trillion as of mid-2002.


Dealers and Brokers
Investors typically employ the services of dealers and brokers to execute the purchase and sale of securities. Some of these brokers are considered full-service brokers. Full-service brokers provide a wide variety of services for the investor, including the provision of investment advice. Other firms are considered discount brokers. Discount brokers basically provide the single service of executing the buy and sell orders of investors. For mutual fund transactions the investor can deal directly with the mutual fund. Thus, the investor need not use the services of a broker or a dealer for these types of transactions. Even in these instances, however, an investor may seek the advice of a financial adviser to determine which mutual fund to buy or whether to sell fund shares.


Day Traders
Some investors are known as day traders. These are individuals who sit at computer terminals continuously monitoring stock prices for profit opportunities. They typically own stocks for very short periods of time, usually for less than a day. Day trading became popular with the development of computer technology and with the bull market of the 1990s. But day trading became significantly less popular with the advent of the bear market in 2000.

WHO OWNS STOCKS?

For a long time only the wealthy were likely to own stocks. Middle-class and working-class Americans generally did not participate in the stock market. Recent estimates, however, have shown significant growth in stock ownership. In 1989, 31.6 percent of American families had either direct or indirect stock ownership. By 2001 that percentage had grown to more than half at 51.9 percent. Most families held stock in retirement accounts. Only 21.3 percent of families owned stock directly in 2001. The median value of the direct and indirect stockholdings among families holding stock was $34,300, up from $27,200 in 1998 and $10,800 in 1989. This means that half the families holding stock owned more than $34,300 worth, and half owned less than $34,300. For families holding stocks, the value of their stockholdings increased from 28 percent of all their financial assets in 1989 to about 54 percent in 1998. Financial assets include checking accounts, certificates of deposit, savings bonds, bonds, stocks, mutual funds, retirement accounts, cash value of life insurance, and the like.

TYPES OF STOCK

The rights and benefits of a stockholder vary according to the type of stock held. There are two main categories of stock, common and preferred.

A Common Stock
Financial loss or gain can be greater with common stock than with preferred stock. Holders of common stock have residual equity in a corporation. This means they have the last claim on the earnings and assets of a company, and they may receive dividends only at the discretion of the company’s board of directors and after all other claims on profits have been satisfied. For example, if the company is dissolved, stockholders share in what is left only after all other claims have been settled. Because dividends and equity do not have fixed dollar values, holders of common stock can reap greater benefits when a company is prosperous or lose more when a company is doing poorly than holders of preferred stocks.

B Preferred Stock
Holders of preferred stock take precedence over holders of common stock. Preferred stock shareholders are usually entitled to receive a fixed dividend before any payments are made to common stockholders. Holders of preferred stock typically receive a share of the proceeds from the dissolution of a company before holders of nonpreferred stock. Some stocks have both preferred dividends and preferred assets. Stock with first preference in the distribution of dividends or assets is called first preferred or, sometimes, preferred A; the next is called second preferred or preferred B, and so on.

Although holders of preferred stock may have to forego a dividend during a period of little or no profit, this is not true for two types of preferred stock. One is cumulative preferred stock, which entitles the owner to cumulative past-due and unpaid dividends. Another type is protected preferred stock, which the corporation issues after paying the preferred-stock dividends and placing a specified portion of its earnings into a reserve, or sinking, fund in order to guarantee payment of preferred-stock dividends.

Two other categories of preferred stock are redeemable stock and convertible stock. Redeemable stock is issued with the stipulation that the corporation has the right to repurchase it. Convertible stock provides the stockholder with the option of exchanging preferred stock for common stock under specific conditions, such as when the common stock reaches a certain price or when the preferred stock has been held for a particular time.

C Voting, Nonvoting, and Vetoing Stock
Although most stockholders have the right to vote at their meetings, thus participating in corporate management, some stocks specifically prohibit this. Such nonvoting stock may be common or preferred stock. However, at least one kind of stock issued by a corporation must be endowed with the voting privilege. This type of stock is called voting stock, and it may not be changed to nonvoting stock without the stockholder’s consent. Another type of stock is vetoing stock. Holders of vetoing stock may vote only on specific questions. Voting at stockholder meetings can be done by proxy—that is, a stockholder who will not be present at the meeting can authorize someone who will be at the meeting to cast their vote. Each share of stock is worth one vote. Before voting by proxy was permitted, independent stockholders had a greater chance of influencing the management of a company. After voting by proxy was authorized, however, company managers and directors holding a stock minority usually obtained enough proxies from absentee stockholders to outvote any opposition, thus perpetuating their control.

While stockholder voting is typically limited to the determination of the company’s board of directors and other specific corporate matters, there are instances where social concerns lead stockholders to force a change in business operations. For example, during the 1970s and 1980s the stockholders of a number of corporations required their companies to terminate or modify their business operations with South Africa. The stockholders wanted this change because South Africa was then engaged in the practice of apartheid—a policy of segregation involving economic and political discrimination against non-Europeans.

Automobile Racing

INTRODUCTION
Automobile Racing, sport in which drivers race specially designed automobiles over tracks or courses of differing lengths, designs, and constructions. The competition tests the skills of the drivers, the speed capabilities of the vehicles, and the endurance of both. Originally consisting of occasional challenges among wealthy individuals in the United States and continental Europe, automobile racing has evolved into an international year-round professional sport that is one of the most popular spectator attractions in the world.

AUTOMOBILE RACING BASICS
There are three basic types of race courses in automobile racing: (1) the oval track, (2) the road course, and (3) the straight-line course. Oval tracks, which can be dirt, asphalt, or concrete, range in length from 0.16 to 2.5 mi (0.27 to 4 km). Some oval tracks, longer than 1 mi (1.6 km) and highly banked (angled toward the ground), are called superspeedways. Road courses have either of two forms: courses that are created by temporarily closing city streets, and courses specially designed to duplicate the twists and turns of country roads but used only for racing. Road courses of both types are generally 1.5 to 4 mi (2.4 to 6.4 km) long in the United States, sometimes longer in other countries. Straight-line courses consist of a simple strip of asphalt or concrete used for drag races between two vehicles. Straight-line courses are generally 0.25 mi (0.4 km) long, but they can be 0.125 mi (0.2 km) long as well.

There are five basic components of an automobile racing team: (1) the ownership, (2) the team manager, (3) the driver, (4) the support crew, and (5) the sponsors. The ownership of the car is in charge of the team but usually employs a manager to run operations on a day-to-day basis. The driver is always an independent contractor. Drivers usually compete in a variety of different cars for different owners throughout their careers. The support crew maintains the car before, during, and after races. The driver and support crew work together during races to handle needed repairs, tire changes, and fuel refills (done during brief service breaks known as pit stops). Finally, sponsors, usually corporations, provide money to the racing team in exchange for promotional ties. The most obvious examples of this relationship are company and product logos, which are commonly seen on the outside of vehicles during races.

Although there are many categories of automobile racing—and many types and levels of competition within each category—the major forms of the sport differ in the United States and abroad. In most parts of the world, the premier race series are those for Formula One (F1) vehicles and for sports cars. These competitions receive less attention in the United States, where the most important race series are those for Indianapolis (Indy) cars and for stock cars. Some drivers and teams move between American and overseas forms of racing, but this is uncommon.

The coordinating committee for automobile racing in the United States is the Automobile Competition Committee for the United States (ACCUS), which serves as the U.S. representative on the Fédération International de l'Automobile (FIA; International Automobile Federation), the worldwide governing body of the sport. ACCUS coordinates activities between FIA and six major sanctioning bodies for automobile racing in the United States—addressing rules, regulations, automotive specifications, safety, and related matters. The eight organizational members of ACCUS are Championship Auto Racing Teams (CART), National Association for Stock Car Auto Racing (NASCAR), Indy Racing League (IRL), Grand American Road Racing Association (GRAND-AM), Professional Sports Car Racing (PSC), the Sports Car Club of America (SCCA), the National Hot Rod Association (NHRA), and the United States Auto Club (USAC).

RECENT TRENDS

One of the most important issues in auto racing is spectator and driver safety. The sport has always been dangerous, with every innovation to increase speed also ratcheting up the level of danger. Unfortunately, although some safety measures—such as fire control and better helmets—have been developed in response to accidents, the innovations did not stem the tide of deaths. One study done in 2001 estimated that, at all levels of the sport, there were more than 250 racing-related deaths in the United States since 1990. In particular, the deaths of several high-profile drivers—Ayrton Senna in 1994, Adam Petty in 2000, and Dale Earnhardt in 2001—highlighted the need for mandatory head restraints and other safety controls, and the governing bodies of the sport began to act. Spectators who are killed when parts of cars fly into the grandstands also remain a concern for the sport.

Another problem in automobile racing both in the United States and internationally is the immense cost of competing. Driver salaries have skyrocketed and the cost of building a car capable of winning is often enormous, sometimes into the millions of dollars. To win a racing series, such as the Indy car championship or the Winston Cup, requires a fortune for salaries, construction, engine rental and maintenance, and other related costs. Modern racing teams require large corporate sponsorships along with lucrative television deals to have a chance to win. These sources of revenue can suddenly dry up if the overall economy sours or other problems develop, such as the governmental restrictions on tobacco advertising that have hurt the sport financially in recent years.
Another concern is the rapid rate of technological change in automobile racing. Early in the sport's development the race cars changed gradually, often with years intervening between significant innovations. Over time, however, it became increasingly common for competitors to actively seek technological superiority. This can be very costly, as research, technical staff, and implementing change itself (requiring the physical construction of new cars or components) add a great deal to the cost of running a race car. If a team does not keep up with the cutting-edge technology, however, it may be sacrificing a chance for victory. Such challenges will continue to be part of automobile racing in the years ahead.

Brands of Cars;

Brands of Cars;
ACURA
ALFA ROMEO
ASTON MARTIN
AUDI
AUSTIN-HEALEY
BENTLEY
BMW - USA
BMW - U.K
BMW - Germany
BUICK
CADILLAC
CHEVROLET
CHRYSLER
CHRYSLER CORPORATION
CITROEN
COBRA
DAEWOO
DAIHATSU
DELOREAN
DODGE
EAGLE
FERRARI
FIAT
FORD
Ford - U.K.
GEO
GENERAL MOTORS (GM)
GMC
HONDA
HUMMER
HYUNDAI
INFINITI
ISUZU
JAGUAR
JEEP
KIA
LAMBORGHINI
LANCIA
LAND ROVER
LEXUS
LINCOLN
LOTUS
MASERATI
MAZDA
MCLAREN
MERCEDES-BENZ
MERCURY
MG
MINI
MITSUBISHI
NISSAN
OLDSMOBILE
OPEL
PEUGEOT
PLYMOUTH
PONTIAC
PORSCHE
RENAULT
ROLLS ROYCE
ROVER
SAAB
SATURN
SEAT
SKODA
SUBARU
SUZUKI
TOYOTA
VAUXHALL
VOLKSWAGEN
VOLVO

Advertising

INTRODUCTION

Advertising, a form of commercial mass communication designed to promote the sale of a product or service, or a message on behalf of an institution, organization, or candidate for political office. Evidence of advertising can be found in cultures that existed thousands of years ago, but advertising only became a major industry in the 20th century. Today the industry employs hundreds of thousands of people and influences the behavior and buying habits of billions of people. Advertising spending worldwide now exceeds $350 billion per year. In the United States alone about 6,000 advertising agencies help create and place advertisements in a variety of media, including newspapers, television, direct mail, radio, magazines, the Internet, and outdoor signs. Advertising is so commonplace in the United States that an average person may encounter from 500 to 1,000 advertisements in a single day, according to some estimates.

Most advertising is designed to promote the sale of a particular product or service. Some advertisements, however, are intended to promote an idea or influence behavior, such as encouraging people not to use illegal drugs or smoke cigarettes. These ads are often called public service ads (PSAs). Some ads promote an institution, such as the Red Cross or the United States Army, and are known as institutional advertising. Their purpose is to encourage people to volunteer or donate money or services or simply to improve the image of the institution doing the advertising. Advertising is also used to promote political parties and candidates for political office. Political advertising has become a key component of electoral campaigns in many countries.

Many experts believe that advertising has important economic and social benefits. However, advertising also has its critics who say that some advertising is deceptive or encourages an excessively materialistic culture or reinforces harmful stereotypes. The United States and many other countries regulate advertising to prevent deceptive ads or to limit the visibility of certain kinds of ads.
Advertising has become increasingly international. More than ever before, corporations are looking beyond their own country's borders for new customers. Faster modes of shipping, the growth of multinational corporations, rising personal income levels worldwide, and falling trade barriers have all encouraged commerce between countries. Because corporations are opening new markets and selling their products in many regions of the globe, they are also advertising their products in those regions.

In 2000 the United States was the leading advertising market in the world with total advertising spending of $147.1 billion. Japan ranked second with $39.7 billion, followed by Germany with $20.7 billion, the United Kingdom with $16.5 billion, and France with $10.7 billion. This article deals primarily with advertising practices in Canada and the United States.

TYPES OF ADVERTISING

Advertising can be divided into two broad categories—consumer advertising and trade advertising. Consumer advertising is directed at the public. Trade advertising is directed at wholesalers or distributors who resell to the public. This article focuses on consumer advertising, the form of advertising that is familiar to most people.
Consumer advertising can be further divided into national advertising and local advertising. National advertising is aimed at consumers throughout the entire country. National advertising usually attempts to create awareness among the public of a product or service, or it tries to build loyalty to a product or service. Local advertising is aimed at informing people in a particular area where they can purchase a product or service. Advertising to the public may also take the form of institutional advertising, image advertising, informational advertising, or cooperative advertising.

Institutional advertising seeks to create a favorable impression of a business or institution without trying to sell a specific product. This type of advertising is designed solely to build prestige and public respect. For nonprofit institutions, such advertising helps support the institution’s activities—for example, by encouraging blood donations or cash contributions for the work of an organization like the Red Cross. A for-profit business has other reasons for improving its reputation rather than trying to sell a particular product. In some cases a large company may sell a diversity of products. As a result, there is more value and greater efficiency in building a brand image for the company itself. If consumers learn to have a high regard for the company, then they are more likely to have a favorable opinion of all of the company’s diverse products.

Many advertisers prefer a strategy known as image advertising. These advertisers seek to give a product a personality that is unique, appealing, and appropriate so that the consumer will want to choose it over similar products that might fulfill the same need. The personality is created partly by the product's design and packaging but, more importantly, by the words and pictures the advertisements associate with the product. This personality is known as a brand image. Advertisers believe brand image often leads consumers to select one brand over another or instead of a less expensive generic product. Brand image is especially important for commodities such as detergents, jeans, hamburgers, and soft drinks, because within these product categories there are few, if any, major differences.

Informational advertising seeks to promote an idea or influence behavior. Sometimes known as public service advertising, it may try to discourage young people from using illicit drugs or tobacco, or it may encourage people to adopt safer, healthier lifestyles.

Cooperative advertising is an arrangement between manufacturers and retailers in which manufacturers offer credits to their retail customers for advertising. The credits, or advertising allowances, are based on the amount of product the retailer purchases. For example, if the retailer purchases $100,000 worth of a product from a manufacturer, the manufacturer’s cooperative advertising program may allot a 1 percent credit, or $1,000, toward the cost of purchasing an ad that will feature the product. In addition, some manufacturers will match the amount that the retailer spends, sharing the cost of the ad. In the United States antitrust laws enforced by the Federal Trade Commission (FTC) ensure that these ad allowances are offered on equal and proportionate terms so that large retailers are not unduly favored over small retailers. Cooperative advertising is a form of local advertising because it directs consumers to local retail outlets.