hello this is the second section for module 8. so this is a description of the feature of common stock and prefer stock so you probably already know that common stock allows the shareholders to vote they have very often used proxy vote um there is different class of stock meaning that for instance class a will give you the right to have a dividend but less voting right versus class b will be the opposite so different different right for different shareholders and then of course shareholders have the right to share the dividend or the company pay one they have they can share the remaining assets if the company is liquidated and it's really remaining because if the company is liquidated or the irs the customers the employee and so on will have to receive their money first so most probably they will not be much remaining and then they have a preemptive right which means that when the company is selling additional share of stocks well those stocks must be offered to the existing shareholders first now this provides some information about the dividend remember the dividend is not a liability until it has been declared by the board so you can a company can very well omit to pay a dividend um and finally the dividend is not a business expense right so there's no tax deduction here's some information about preferred stock so preference means that the orders of the preferred share must receive the dividends before the holder of the common stock again dividend is not a liability uh most preferred dividend however are cumulative this means that the dividend that you did not paid will have to be paid before the common dividend prefers stockholders generally do not have voting right and prefer share have a stated liquidation value which is often a hundred and then finally a little bit of information about the stock market so what do you want to review here make sure you keep in mind the difference between primary when the company is selling new stocks and secondary make sure you keep in mind the difference between dealer that have an inventories and brokers that are bringing buyers and sellers together let's take a look a little bit at the new york stock exchange you know it's still one of the largest market in the world it's a hybrid market meaning that nowaday there's a lot of trade that are electronic but there is also some face to face uh who is trading on that market what those that have a license and there is a thing 1366 license so the license holder a designated market maker the floor broker and the slp which are the supplemental liquidity order so the dmm designated market maker we used to call them the specialist they normally act as a dealer for a specific stock so those designated market maker they maintain an inventory and they stands ready to trade at the quoted bid right so they will post the price at which they will buy and ask they will also post the price at which they want to sell and they make their profit by the differences between the bit and the ask why the spread so again you understand that the smaller the spread the most liquid it is a floor broker well the the goal of the job for the four block of floor broker is to match buyers and sellers right so they perform a search function for a fee and they normally do not have inventories and then supplemental liquidity providers also investment firms that agree to be active participant in the stocks that have been assigned to them they normally trade purely for their own account okay so but there's a big difference between a as um yeah supplemental liquidity provider and the designated market maker the designated market maker and the floor traders on the floor the slp do not operate on the floor of the exchange now you also know that nasdaq is the national association of security dealer automated quotation it's not a physical exchange it's computer-based and on nasdaq you have a lot of market maker that uh all the inventory of the stock just continue learning and you can for instance look at um some of the quote so this is a quote for uh costco you can see that the highest price was 169.59 the lowest price for the year was uh 138.57 so this costco which is um costco wholesales is paying a dividend of a dollar eighty percent share which gives us a dividend yield of about one point twelve percent uh how do we know that we'll take the dividend divided by the price the p e ratio is 29.3 right so the stock is selling for 29.31 times earnings and the most recent price is uh 160.63 cents excellent this is the end for this module