* Learning about Business: Buying Stocks & Bonds

Learning about Business
Buying Stocks and Bonds

Business Vocabulary: Do you know what these words mean?
bond
business expenses
company
dividend
loan
investing
investors
interest
U.S. Savings Bond
profit
risk
salary
shareholder
shares
stock
the Stock Market

In 2012, Craig and Omar were broke.
They needed to earn money.
They decided to sell lemonade.
http://www.aisquared.com/zoomnews/images/1008/money.jpg

They made up a name for their lemonade company.
They called it LeM
They made up a business plan.
1. COMPANY
--business
LeMo

They needed a lot of things.

Some things they already had.

They needed to buy other things…
2. BUSINESS EXPENSES
--things you buy for your business

…but they had no money to buy what they needed.

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.”

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.”
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.”
reiki.sjdr.com.br
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.

reiki.sjdr.com.br
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.
L
LeMo
Bond Certificate
$110
5. BOND
--money you loan to a
business

reiki.sjdr.com.br
Piggy Bank v. Bond Certificate
2011 2012 2011 2012
$100 $100 $100 $110
LeMo
Bond Certificate
$110

reiki.sjdr.com.br
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.
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.”

reiki.sjdr.com.br
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 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.

reiki.sjdr.com.br
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.

reiki.sjdr.com.br
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.
http://www.theproducersperspective.com/my_weblog/2009/05/how-to-invest-in-a-broadway-show-part-ii.html

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.

http://www.fordham.edu/images/admin_offices/hr/administrator%20paystub%20image.jpg
http://mindmillion.com/MONEY/cartoon_money_dollar.htm
After one year, LeMo earned $500.
They cannot keep all of the money.
Craig and Omar must pay business expenses.

$500 = total earnings, 2010 – 2011.
150 = buying lemons, paper cups, stand

$500 = total earnings, 2010 – 2011.
- 150 = buying lemons, paper cups, stand
350

$500 = total earnings, 2010 – 2011.
350
- 100 = salary for Craig ($50) & Omar ($50) for working.
11. SALARY
--paycheck for working at
your job

$500 = total earnings, 2010 – 2011.
350
- 100 = salary for Craig ($50) & Omar ($50)

$500 = total earnings, 2010 – 2011.
350
250

$500 = total earnings, 2010 – 2011.
350
250
-110 = Maggie's Bond (+ interest)

$500 = total earnings, 2010 – 2011.
350
250
-110 = Maggie’s Bond (+ interest)
140

$500 = total earnings, 2010 – 2011.
350
250
-110 = Maggie’s Bond
140 PROFIT

$500 = total earnings, 2010 – 2011.
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

$500 = total earnings, 2010 – 2011.
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.

Craig and Omar used their dividend for their business.

Business earnings go up and down.

http://finance.yahoo.com/tech-ticker/the-government-has-destroyed-business-confidence-former-fdic-boss-isaac-says--but-help-is-on-the-way-535426.html?
tickers=^dji,^ixic,^gspc,xlf,SKF&sec=topStories&pos=9&asset=&ccode
Some businesses are not successful.
Business owners and stockholders may lose their money.

Businesses are successful when they find out what customers want.
Businesses must always make changes to match their customers needs.

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

The Stock Market is where people buy and sell business shares.
15. THE STOCK MARKET
--where people buy and sell shares in
business
corbisimages.com
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.

Investors must be careful about making decisions.
He just lost a
lot of money.

http://boagworld.com/season/1/episode/1/
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.

Business Vocabulary
bond –lend money, then earn back the money plus interest
business expenses –things you must buy for your business
company –a business
dividend – business profits shareholders (investors) earn
loan –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 lose
salary –money you earn from working
shareholder – a business partner
shares –pieces of a business
stock –money in a business
the Stock Market –a place to buy and sell business shares

* Learning about Business: Buying Stocks & Bonds

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