XVIII STOCKS AND BONDS STOCK COMPANIES Companies. When several persons wish to conduct a business enterprise together, they organize a company. Capital. The money invested in business is called capital. Corporations. If the organization of the company is recognized by the state (in accordance with certain laws) the company is said to be incorporated. When incorporated, the company (corporation) can legally transact business like an individual. Stock. The capital of a corporation is divided into equal amounts called shares. In this case the capital is called capital stock, or simply stock. Whatever amount a share represents is called the face value, or par value, of the share. In what follows, the par value of a share is to be regarded as $100, unless otherwise specified. Capital is invested in a stock company by the purchase of one or more of the shares of stock. Stock Certificates. Certificates are issued for the shares of stock. The owners of stock are called stockholders. A certificate of stock is shown on page 170. Dividends. The business is carried on under the management of officials elected by the stockholders. At regular intervals, usually twice, or four times a year, the profits are divided among the stockholders, except what may be reserved for the needs of the business. The sum paid is called a dividend, and is usually expressed as a rate per cent of the face value of the share. Sale of Stock. When a stockholder wishes to withdraw his capital from the business, he sells his stock to any purchaser he may find. A share of stock may be sold for its face value, or for more or less, according to the state of success of the business and other considerations. If it sells for its face value, it is said to be at par, otherwise, above or below par. 66 Just as there are 'commercial exchanges "in the large cities to facilitate the purchase or sale of crops, so there are "stock exchanges" to facilitate the purchase and exchange of stocks. The stock broker charges a commission of of 1% on the par value for either buying or selling. When the price of stock is quoted 90, 85, 45, 371, or 284, it means that a share whose par value is $100 can be bought for $90, $85, and so on. 1. What must one add to each quotation to find the cost of a share, including brokerage? What must one subtract to find what the sale of a share would net the seller? Written. What is the cost of the following purchases of stock : 2. 17 shares of Baltimore and Ohio Railway stock at 105? 3. 150 shares of Illinois Central Railway stock at 128? 4. 2,000 shares of St. Louis and S. W. stock at 128? 5. 5,000 shares of Texas Pacific Railway stock at 411? 6. What did the owner of the stock in each of the above Exercises realize from its sale, after having paid the broker? How much was realized from the following sales: 7. 25 shares of United States Steel at 98? 8. 125 shares of Amalgamated Copper at 75? 9. 75 shares of Pennsylvania Railway at 1081? 10. 100 shares of Grand Trunk Railway at 1121? 11. The par value of a share of stock in each of the quotations above is $100; which stocks were bought or sold above par? Below par? 1. Mr. Richmond owned 12 shares of New York Railway stock; he received an annual dividend of $6 a share; what was his yearly income from these shares? 2. Mr. Marsh received a semiannual dividend of 4% on 10 shares of mining stock; what was his annual income? 3. Mr. A owns 10 shares of stock on which a dividend of 3% has been declared; how much does he receive? 4. What is the annual income from 160 shares of stock which pays a quarterly dividend of 13%? Written. 5. Mr. Field bought 100 shares of Chicago and Great Western Railway stock at 897; how much did he pay for the stock including brokerage? It paid an annual dividend of 4%; how much did he receive in dividends? 6. How many dollars did Mr. Field receive for every $90 invested? How much was this on each dollar? Income on Investment. The amount of income received per dollar of investment is called the rate of income on the investment. 7. If stock paying an annual dividend of 6% costs 120 (brokerage included), how many dollars are received each year from an investment of $120? 8. What is the rate of income in Exercises 5 and 7? 9. If Diamond Match stock sells for 140 and pays an annual dividend of 10%, find the rate of income? 10. What is the rate of income on an investment in 10 shares of stock paying 4% annually and bought at 80? II. If an annual dividend of 6% is paid on 200,000 shares of stock, how much is paid in dividends each year? 12. A company, the par value of whose stock is $50, declares an annual dividend at the rate of $4.75 a share; what is the rate per cent of the dividend? Preferred and Common Stock. Sometimes the capital stock of a corporation is divided into two kinds: preferred and common. A dividend is usually guaranteed on the preferred stock, and this dividend must be paid before any dividend whatever may be paid on the common stock. Oral. 1. A carpet company organized with a capital of $1,000,000; how many 100-dollar shares of stock were there? 2. The members of the firm subscribed for of the stock; how many shares were sold to other investors? 3. 2,000 shares were preferred stock; how many shares of common stock were there? 4. What sum was required annually to pay the dividends on the preferred stock at 5%? 5. At the end of the first clared on the common stock; What sum was paid as dividends on the common stock? 6. Find the cost at the opening price of 100 shares of each of the first 5 stocks quoted in this list. 7. Find in the table cases where both the preferred and the common stock of the same company is quoted (pr. means pre year a 2% dividend was dehow much was this a share? Sales and range of prices: Sales. Open. High. Low. Close. Amalgamated...242600 57 57% 56% 56% 10400 80% 81 80% 80% Atchison Atchison pr.... 300 98% 98% 98% 98% 17400 86% 87% 86% 86% 1300 127 127% 127 127% 100 168% 168 168 168% 14500 38% 39% 38% 38% 300 41% 41% 41 41% 100 83 83 B. & O... C. & A. pr. 83 83 155% 153% 154 C., M. & St. P. 13900 155 C. & N. W.. 200 186 187 186 187 Chi. Term. 400 6%2 62 514 54 ferred). Which is worth the more? Find the cost of 100 shares of each at the highest price of the day. 8. Make and solve 20 problems from these quotations. |