2.9:
Introduction to Stock
A stock represents a share of a company's ownership, with the possibility for profits and voting rights for shareholders.
There are two types of stock, namely common stock and preferred stock.
Common stock offers ownership and voting rights, whereas preferred stock usually offers fixed dividends but usually lacks voting rights.
For example, Salt Corporation publicly issues stocks to investors to raise funds.
It allows the company to sell a portion of its ownership to investors in exchange for capital without raising debt. However, it reduces the control of founders as they share the ownership with other shareholders.
The raised capital can be used to invest in long-term assets like purchasing machinery, building plants, and investing in research and development.
Additionally, some stocks pay dividends, which are portions of the company's profits distributed to shareholders.
The stock prices fluctuate as they are influenced by internal company events, like the generation of profits, or external factors, like industry trends and market sentiments. This helps in keeping the company focused on performing well.
Issuing stock allows a company to raise capital while ensuring accountability to investors.
2.9 Introduction to Stock
Stocks represent ownership shares in a corporation, providing shareholders with a claim on part of the company's assets and earnings. When you purchase stock, you effectively become a partial company owner. Stocks are typically classified into two main types: common and preferred. Common stockholders have voting rights and may receive dividends, while preferred stockholders have a higher claim on assets and earnings and often receive fixed dividends.
Companies issue stocks to raise capital for expansion, development, or other financial needs. Stocks are bought and sold on stock exchanges, such as the New York Stock Exchange or Nasdaq, through brokers or online trading platforms. The price of a stock fluctuates based on supply and demand, influenced by factors like company performance, industry trends, and broader economic conditions.
Investing in stocks offers the potential for significant returns but carries risks. Market volatility can lead to rapid changes in stock prices, impacting investment value. Diversification, or spreading investments across different stocks and sectors, is a common strategy to manage risk.
Understanding stocks involves learning about market dynamics, financial indicators, and economic factors. It requires research and often a long-term perspective to navigate the complexities and achieve investment goals.