Question

Search the Internet for financial information about the company selected.

Search the Internet for financial information about the company selected.

on Pfizer Comapany

Evaluate the following in a 525-word response:

• Characteristics of common and preferred stock.
• How stock markets work.
• The connection between the value of shares and dividends.
• Mention the ticker symbol of the company studied, the current price of the stock, and its financial history.
• Indicate if you would recommend investing in this stock and why. Explain.

Answer 1

Characteristics of Common Stock

• Common stock represents ownership in a company, and each share of common stock holds an equal amount of that ownership.
• Common stock grants the stockholders rights, which include the right to sell the stock in the secondary market, either through a public exchange or in a private transaction. Stockholders have the right to participate in the profits of the company through dividend payments, when such dividends are authorized by the company board of directors. They have the right to vote at the annual stockholders' meeting, and they have the right to the company's remaining assets if the company goes out of business.

Characteristics of Preferred Stock

• Preferred stock has characteristics of both common stock and a bond; it is sometimes referred to as a hybrid security. Like common stock, preferred stock gives the shareholder an ownership position in the company; like bonds, preferred stock usually doesn't have voting rights.
• Preferred stock is typically issued with a fixed dividend; this is like a bond's interest rate, but like common stock, preferred stock dividends are not guaranteed.
• Preferred stock might include several other variables, such as a redemption date, convertible features and call provisions.
• Preferred stockholders have precedence over common stockholders in the event of a company liquidation.

1. How stock markets work.

• A stock exchange in the platform where financial instruments like stocks and derivatives are traded. Market participants must be registered with the stock exchange and SEBI to conduct trades. This includes companies issuing shares, brokers conducting the trades, as well as traders and investors. All of this is regulated by the Securities and Exchange Board of India (SEBI), which makes the rules of conduct.
• First, a company gets listed in the primary market through an Initial Public Offering (IPO). In its offer document, it lists details about the company, the stocks being issued, and so on. During the listing, the stocks issued in the primary market are allotted to investors who have bid for the same.
• Once listed, the stocks issued can be traded by the investors in the secondary market. This is where most of the trading happens. In this market, buyers and sellers gather to conduct transactions to make profits or cut losses.
• Stockbrokers and brokerage firms are entities registered with the stock exchange. They act as an intermediary between you, as an investor, and the stock exchange.
• Your broker passes on your buy order to the exchange, which searches for a sell order for the same share. Once a seller and a buyer are fixed, a price is agreed finalized, upon which the exchange communicates to your broker that your order has been confirmed.
• Once you place an order to buy a particular share at a said price, it is processed through your broker at the exchange. There are multiple parties involved in the process behind the scenes.
• Meanwhile , the exchange also confirms the details of the buyers and the sellers to ensure the parties don’t default. It then facilitates the actual transfer of ownership of shares. This process is called settlement. Earlier, it used to take weeks to settle trades.

Now, this has been brought down to T+2 days. For example, if you conducted a trade today, you will get your shares deposited in your demat account by the day after tomorrow ( i.e. two working day).

• The exchange ensures that the trade is honored during the settlement#. Whether the seller has the required stock to sell or not, the buyer will receive his shares. If a settlement is not upheld, the sanctity of the stock market is lost, because it means trades may not be upheld.
• As and when trades are conducted, share prices change. This is because prices of shares – like any other goods – are dependent on the perceived value. This is reflected in the rise or fall of demand for the stock. As demand for the stock increases, there are more buy orders. This leads to an increase in the price of the stock. So, when you see the price of a stock rise, even if it is marginal, it means that someone or many placed buy order(s) for the stock. Larger the volume of trade, greater the fluctuation in the stock’s price.

The connection between the value of shares and dividends.

The declaration and payment of dividends also has a specific and predictable effect on market prices of the shares. For investors, dividends serve as a popular source of investment income. For the issuing company, they are a way to redistribute profits to shareholders to thank them for their support and to encourage additional investment. Dividends also serve as an announcement of the company's success. Because dividends are issued from a company's retained earnings, only companies that are substantially profitable issue dividends with any consistency. Dividends are often paid in cash, but they can also be issued in the form of additional shares of stock. In either case, the amount each investor receives is dependent on their current ownership stakes.

Details of Microsoft

The stock market ticker for Microsoft is MSFT. Microsoft is traded on the NASDAQ, and is one of the largest companies by market cap in the world.

Current Market Price of Microsoft is 140.54 USD.

The Microsoft 52-week high stock price is 141.34 and the Microsoft 52-week low stock price is 93.73

The average Microsoft stock price for the last 52 weeks is 115.23.

Yes, I will be recommending people to invest in Microsoft as it is one of the largest companies by market cap in the world, there would be very less chances of fraud. The free cash flow of the Microsoft is more than 60 % of its net earnings. It also not have any unmatched capital allocation, which results in good returns from the same.