Official Forums for the Ultimate Economy Game



Jump to:  
Search for:
The Simunomics Forums require separate registration from the game itself. However, forums and chat use the same registration.

It is currently Sun Feb 16, 2020 7:24 pm (All times are UTC [ DST ])




Reply to topic  [ 17 posts ]  Go to page 1, 2  Next
Author Message
PostPosted: Tue Feb 09, 2010 3:49 am 

Joined: Dec 24, 2009
Posts: 179
Offline
User avatarDeMint Financials
 
The Stock Market “How To” Guide

Lately we have all heard about the coming addition of a stock market in Simunomics. How this will be structured is merely speculation, only the moderators and game admin know the real secrets. However, if modeled after a real life stock market (which I truly hope it is), this guide will prove to be useful resource to anyone seeking additional information. As a certified financial advisor and accountant with a Masters in Business Administration (MBA), I know that I can help transfer my knowledge to anyone willing to learn. This is right about the time infomercials start their sales pitch, but I assure you this will be free to everyone.

To understand the essential basics of a stock market, we need to first understand the essential basics of stocks.

What are Stocks?
A stock represents ownership in a business, much like a deed represents the ownership of a property or a title represents the ownership of a vehicle. The difference between all of these of course is simple, a company is usually represented by hundreds of thousands of shares of stock.
In real life stockholders are granted specific rights delegated by a corporation’s charter, however the Simunomics version may not have corporation charters. But no matter, stockholders are also granted general rights when the stock is purchased that do not change from company to company.
Stockholders general rights include: The right to vote at stockholder’s meetings, The right to sell or otherwise dispose of their stock, The right to purchase their proportional share of any common stock later issued by the corporation which protects the stockholders right to proportionate interest in the company, The right to receive the same dividend on each common share of the company, The right to share in any assets remaining after creditors and preferred stockholders are paid when, and if, the corporation is liquidated, and The right to receive timely financial reports.

Stocks are usually referred to as Capital Stock represented by Stock Certificates and come in two forms Common Stock and Preferred Stock.

Let’s discuss the terminology for stock, which will hopefully make explaining processes later on easier.
Authorized Stock, is the number of stock a corporation is allowed to sell
Outstanding Stock, this consists of the number of shares issued and outstanding on the market,
Selling (Issuing) Stock, this can be done in two forms directly and indirectly, again I’m not sure if Simunomics plans on setting up a brokerage house or market to sell stocks on but both are a form of indirect selling,
Market Value of Stock, the price at which a stock is bought and sold, these prices are influenced by expected future earnings, dividends, growth, the market value does not reflect what the stock can actually be sold for.
Classes of Stock, corporations are sometimes allowed to issue different classes of stock such as preferred stock or different levels of common stock, for instance Company X has Class A Common Stock where each shareholder has 10 votes for every share and Class B Common Stock shareholders have 2 votes for every share.
Par Value Stock, stock that is assigned a par value which is an arbitrary number used to calculate Paid-In Capital in Excess of Par Value on accounting reports.
No-Par Value Stock, stock not assigned a par-value.
Stockholder’s Equity, a corporations equity which consists of Paid-In Capital and Retained Earnings.

What I hope to see added into the Simunomics Stock Market is the option between selling Common Stock, and Preferred Stock. Usually a corporation cannot limit the rights of common stock shareholders, but with Preferred Stock a corporation can elect to revoke the right to vote, which disables anyone from gaining the ability to takeover, or otherwise control the interests of a company.

How To Issue Stock.

Corporations can issue stock in four different ways, Issuing Par Value Stock, Issuing No-Par Value Stock, Issuing Stated Value Stock, and Issuing Stock for Noncash Assests.

Issuing Par Value Stock

Par Value Stock can be issued at par, at a premium (above par value), or at a discount (below par value). Issuing at par value means that the stock is sold at the price the company sets out in their charter. To illustrate this, imagine that Company X issued 30,000 shares of Common Stock Par Value $10. The company would collect 300,000 dollars debited to Cash and 300,000 dollars would be credited in the equity section of the balance sheet for Common Stock, Par Value $10. Issuing at a premium means that the stock is sold above the price set out in the charter. Let’s imagine instead that Company X sold their stock for 15 dollars a share, The company would have 450,000 dollars collected and debited to cash, but instead of crediting all 450,000 to Common Stock only 300,000 dollars gets credited to common stock and the remaining 150,000 gets credited to Paid-In Capital in Excess of Par Value. Issuing at a discount is illegal in many states so this doesn’t really matter but to be clear it means that you decide to sell your stocks below the Par or Stated Value.

Issuing No-Par Value Stock

No par stock is an easier way to issue stock, however, this method makes it harder to determine how many shares are outstanding on the market just by looking at the balance sheet. Stocks are sold at whatever price and the amount received is collected and debited to cash and the stocks are credited to equity under Common Stock, No Par Value

Issuing Stated Value Stock
This particular stock, a form of No-Par Value Stock, can turn a balance sheet into a lengthy paper as each time the stock is sold at a different value a new equity account is created. For instance Company X sells 30,000 shares of stock at a stated value of $10 and then two weeks later sells another 10,000 shares at a stated value of $30, $600,000 has been collected and debited to cash but two equity accounts get credited here one as Common Stock, $10 Stated Value and Common Stock $30 Stated Value.

Issuing Stock for Noncash Assets

This method is simple, stock is used as cash to purchase items. Say you need to buy 50,000 wood and you don’t have enough cash to do it. Instead of borrowing money you can use your stocks to purchase the wood. Say the wood is selling for 35 dollars per piece of wood, and your stock is worth 10 dollars per stock. You would issue 175000 shares to the wood supplier in exchange for the wood. If your really good, later on you’ll be able to convince the wood supplier that you will issue 75,000 shares in exchange for the 50,000 wood saving yourself $1,000,000. However, Simunomics may limit this option but I assure you many companies in real life exploit this option regularly.

Dividends

Dividends come in two forms, Cash Dividends and Stock Dividends. Both types directly effect retained earnings as dividends are paid out directly from retained earnings.

Cash Dividends are merely just a means to issue a bonus to stockholders, and has no real direct effect on price. It can have indirect effects based on how much you pay out per share, how many times a year you pay out and so on and so forth. Obviously to pay out a cash dividend the company will need to have the cash on hand to do so.

Stock Dividends exist for at least two reasons, if not more. First, stock dividends are issued to keep the market price of stocks affordable, and the second being an attempt by the company to provide evidence that the company is doing well and will continue to do well. A stock dividend is done by issuing a certain percentage of stocks outstanding to shareholders. For instance, say Company X wishes to issue a 10 percent stock dividend to all of the shareholders. If 300,000 shares are outstanding then 30,000 shares will be distributed respectively among the holders. This is paid for by debiting retained earnings.

Stock Splits, an option held by each corporation that splits each share based on decisions made by the Corporation for instance 300,000 shares get split 2 to 1, Now 600,000 shares exists. This has no effect on retained earnings or paid in capital.

Purchasing Your Own Stock
Attention to all, this is called Treasury Stock, and yes every corporation can purchase its own stock. However, Corporations cannot pay themselves dividends so this is essentially worth the same as stock that hasn’t been issued. I would advise every company that is going public to know how many shares consists of 51 percent of their company. If you mess up the experts on here will find it and exploit it so be careful.

Buying Stock

I’ve heard so many things over the years about how to find the best stock but really it’s just like rolling the dice you can get lucky and guess what will be thrown but normally you have no clue what the outcome will be. Here I’ll give you a few tools and some advice but it is going to be up to you to determine how you are going to play it.

Earnings Per Share
This represents how much each share has earned in regards to the companies retained earnings.

Basic Earnings Per Share = (Net Income – Value of Preferred Share Dividends)/(Common Shares Outstanding)

Example: In November, Company X made 6,000,000 in retained earnings. No dividends were paid to preferred shareholders and 300,000 shares have been issued and are outstanding. So we take 6,000,000 and divide that by 300,000 which yields each share to have earned 20 dollars in the month of November.

Price-Earnings Ratio
The Stock’s Value or Market Value is determined by its expected future cash flows. First I’ll give you the formula and then I’ll explain it a little more.

Price-Earnings Ratio = (Market Value (Price) Per Share)/(Earnings Per Share)

Example: Company X has a stock value of 60 dollars per share and the earnings per share was 20 the formula yields a ratio of 3 to 1. This tells us that the share is probably underpriced so we want to buy it and hold onto it. When the share reaches a ratio above 20 to 1 then we know that the stock is overpriced and we need to sell it. This isn’t always true, but is one of the many tools investors use to find potential growth stocks.

Dividend Yield
The dividend yield formula will be an inside look into the mind of the Simunomics player. This will tell you whether or not you are investing into a growth stock, or an income stock. To do this take this formula

Dividend Yield= (Annual Cash Dividends Per Share)/(Market Value (Price) Per Share)

Example: You are looking at two companies to potentially invest in. You are interested in finding an income stock rather than a growth stock. Company X paid out .50 per share in dividends last year and the price of the stock is 50 dollars. Company Y paid out 5.00 per share in dividends last year and the price of the stock is 60 dollars per share. By using the formula we find that the dividend yield for Company X was 1% and the Dividend Yield for Company Y was 8.33%. So now we know that Company X is the growth stock and Company Y is the Income Stock.
I look at this as getting interest on your cash investment.

Book Value Per Share

Here’s the formula to determine what the company considers your Book Value to be (the dollar value you own in the company)

Book Value Per Share= (Stockholders’ equity-common shares)/(Number of common shares outstanding)

Example: Company X has issued and sold 400,000 shares of common stock. Say the equity sheet looks like this
Stockholders’ Equity
Common Stock-$20 Par Value 8,000,000
Paid-In Capital in excess of Par Value, Common Stock 2,000,000
Retained Earnings 245,000,000
Total Stockholders equity 255,000,000

The Book Value Per Share formula should yield a value of $637.50 per share, this really only shows what the value is per share if the company were to be liquidated.

Alright so that should be a basic touch on a stock market, I’ll probably edit this as I receive feedback but this should be a good rough draft for you.


Top
 Profile  
 
 Post subject:
PostPosted: Sun Jun 27, 2010 10:51 am 

Joined: Nov 6, 2009
Posts: 4948
Offline
User avatarReal Value
 
By the way, in the game Capitalism, which the developers of this game seem to like, it is fairly easy to manipulate the stock market and create massive amounts of cash via trading between related parties or firms in ways that inflate stock prices far beyond any reasonable valuation for the firms shares being traded.

In order to prevent such speculation, I recommend the follow constraints be added into the stock market:

1. No company can own more than 20% (or a smaller number) of the equity of another company.
2. No companies sharing the same IP can combine purchases owning more than this same percentage (to prevent someone from owning 90% via multiple accounts)
3. Share values are NOT used as a basis for loans (only fixed assets, as we have now in the game). This prevents common real world and game problems with high leverage speculation in equities.
4. Share values are NOT simply based on prices offered by other players, and there is a large public (NPC like) pool of capital that influences (moderates) stock prices for a large percent of shares issued.
5. Share also will be purchased by the public when offered for sale at some price level which makes it difficult to sell shares super cheap to other players via manipulations on purpose.
6. Earnings (which can be manipulated by player actions) are only one of multiple factors used in determining prices the public (NPC) will pay for shares.

By doing these steps, or if not all of them, at least some of them, you can limit the ability of players to manipulate stock prices. I stopped playing Capitalism when I realized how easy it was for me to take over companies via indirect ownership and control and to increase price, leverage the firms, and sell off assets and shares, leaving bankrupt shells behind and making massive amounts of cash in the process. After being able to be 1000 times richer than Bill Gates in the game via financial manipulation, the game became much less interesting than it was before, and when I play it now, I disable the stock market as it is too tempting to be able to simply create wealth out of thin air via stock manipulation.

By the way, this sort of stock manipulation happens in the real world as well. Penny stocks, in particular, are commonly traded at much higher values than their earnings or assets would justify, and booms and crashes in which some get rich (like happened with the dot.com boom) and many lose money are common. Even with large companies, insider dealings and trades and market manipulation are major sources of concern for regulators and efforts to stop these types of transactions are important to efficient and effective functioning of financial markets in developed countries. When markets are not well regulated, stocks go up and down, but the amount of money that is made in profits by insiders represents a large cost and drain on the efficiency of the capital market overall, and makes the market feel more like a "fixed" casino.

The stock market in the USA in its earlier history had a lot of abuses, and the great leaders of finance of the past often used tricks to extract massive profits from companies, leaving investors with little but a highly leverage shell of virtually no value after the dust had settled. One of the major contributors who help donate the money to found Harvard Business School had bought and sold controlling interest in the same railroad stock multiple times, leaving investors with nothing but a bankrupt shell in the end each time after extracting huge cash profits from his "creative" market transactions. Railroads transformed the country and changed the nation and commerce, but many of the investors in railroad stocks lost money even though, long term, the railroads did make massive profits. Much the same was true of internet stocks, in which some investors and founders made massive profits, but many of those smaller investors who jumped in to invest in this booming new industry lost massive amounts of cash during the dotcom crash.

Booms and busts happen in stock markets, but eliminating leverage (on stocks) and limiting insider trading and closely controlled stocks owned by only a few traders can help greatly reduce market inefficiencies.


Top
 Profile  
 
PostPosted: Sun Jun 27, 2010 3:14 pm 

Joined: Oct 16, 2008
Posts: 2883
Location: India
Offline
Oscorp
Guru of the City
-

_________________
:)


Last edited by Abbas on Sat Jul 16, 2011 11:17 am, edited 1 time in total.

Top
 Profile  
 
 Post subject:
PostPosted: Fri Jul 23, 2010 12:32 pm 
Interviewer

Joined: Mar 28, 2010
Posts: 3990
Offline
User avatarFoodaganza! Inc.
Brainstormer
well the stock market is completly different, but hopefully well get some actual stocks too, though the market is still pretty good

_________________
Andrew Carnegie's Epitaph wrote:
Here lies a man, who surrounded himself with people far wiser than he.


Top
 Profile  
 
 Post subject:
PostPosted: Fri Jul 23, 2010 4:57 pm 

Joined: Nov 6, 2009
Posts: 4948
Offline
User avatarReal Value
 
One useful investing concept, that can easily be applied to this event, is diversification. Invest in multiple stocks, so if one or a few do badly, you won't be killed by making one bad choice.


Top
 Profile  
 
PostPosted: Mon Jun 20, 2011 9:34 pm 

Joined: Jun 15, 2011
Posts: 2
Offline
User avatarNovaPrime
Retailer
Suggestion for the initial stock market exchange: The first listing should be only SSC (Simunomics System Company) stocks for evaluation and monitoring. Limit shareholder purchases to 25% of equity valuation.
Sincerely,
NovaPrime


Top
 Profile  
 
PostPosted: Sat Jul 16, 2011 8:38 am 

Joined: Jul 16, 2011
Posts: 1
Offline
Maa Mangala Ltd
Your post is full of useful info regarding share market. Thanks...



penny stocks


Top
 Profile  
 
PostPosted: Sat Jul 16, 2011 9:40 am 

Joined: Jul 7, 2011
Posts: 53
Offline
User avatarWazzatron's Stuff
 
I'd honestly like to see stock "splitting" involved in game this is a useful way of keeping price's to a minimum.
say player a keeps his stock to a minimal amount now he has a stock that could be worth 1/500th of his fixed asset's now he can sell 1 stock for say $750 and issue a huge amount and then make a lot of money.

Stock splitting prevents this and keep's price's to a minimal amount and buy able amount for newer player's to be able to make money.


Top
 Profile  
 
PostPosted: Sat Jul 16, 2011 9:44 am 
EcoSim Editor

Joined: Jan 19, 2011
Posts: 4623
Offline
User avatarAindala Holdings
Bottled Water Genius
wazzatron wrote:
Stock splitting prevents this and keep's price's to a minimal amount and buy able amount for newer player's to be able to make money.

The newer players should make money through manufacturing and retailing.

_________________
Reporter and co-founder of                                               Founder of
Image                                                 Image
Send your company's statement or press release to us!
Give yourself some exposure for your company!

“If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”
J. M. Keynes


Top
 Profile  
 
PostPosted: Tue Jul 26, 2011 4:41 am 

Joined: Jul 10, 2011
Posts: 2
Offline
none
The stock market and investing for beginners is a bit like a riddle. I also want to invest in stock market but I have no idea that how to start investing in stock market. I am here wondering that how the stock market work.

stock market trading


Top
 Profile  
 
PostPosted: Wed Aug 03, 2011 2:34 am 

Joined: Jul 28, 2011
Posts: 846
Offline
User avatarSONO Fine Retail
Retailer
Aindala wrote:
The newer players should make money through manufacturing and retailing.


Making shares affordable to younger players through splitting is actually a totally valid funding strategy for companies who seek larger capitalization. I don't see why such companies shouldn't be permitted to make their shares appealing to any segment of the population they see fit. Splitting is one mechanism for doing that.


Top
 Profile  
 
PostPosted: Wed Aug 03, 2011 9:12 am 

Joined: Aug 15, 2009
Posts: 146
Offline
User avatarHindustan Corporation
Drakar Patriot
I honestly think that newer players should not be able to buy/sell stocks until they reach a higher Level, because then it can be tempting to create multiple accounts and exploit this as a money making feature.

_________________
Simunomics is simply excellent
Image


Top
 Profile  
 
PostPosted: Mon Aug 15, 2011 1:25 am 

Joined: Dec 24, 2009
Posts: 179
Offline
User avatarDeMint Financials
 
This article just reminds me how long we've been waiting for a functioning stock market, and how long its been since the devs promised us one... :meh:


Top
 Profile  
 
PostPosted: Mon Aug 15, 2011 1:37 am 
EcoSim Editor

Joined: Jan 19, 2011
Posts: 4623
Offline
User avatarAindala Holdings
Bottled Water Genius
DeMint Financials wrote:
This article just reminds me how long we've been waiting for a functioning stock market, and how long its been since the devs promised us one... :meh:

The devs said it was already in an advanced stage of development.

_________________
Reporter and co-founder of                                               Founder of
Image                                                 Image
Send your company's statement or press release to us!
Give yourself some exposure for your company!

“If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”
J. M. Keynes


Top
 Profile  
 
PostPosted: Mon Aug 15, 2011 7:33 am 

Joined: Dec 24, 2009
Posts: 179
Offline
User avatarDeMint Financials
 
funny enough they promised to launch it last July :meh:


Top
 Profile  
 
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 17 posts ]  Go to page 1, 2  Next

It is currently Sun Feb 16, 2020 7:24 pm (All times are UTC [ DST ])


Who is online

Users browsing this forum: No registered users and 1 guest


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum

cron
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group