Change the channel to any business news and you will find some or the other program on the stock market. What you get to see are numbers running along at the bottom of the screen, arrows going up and down near the edges, and some presenter harping on about the present situation in the stock market.
So, what is the stock market these channels are talking about? Simply put, the stock market is a place where shares are evaluated, sold and purchased on a daily basis. This begs the question as to what is a share. A share is a piece of document that entitles the holder to a part ownership of the issuing company and also to a small percentage of profit made by the same. In other words, the owner of a share has voting rights as well as makes profits off the parent company.
In order to understand the importance of shares in the stock market, it is important to get a working knowledge of shares in general. Let us say that a company, sells 10 shares at 1000$ per share to investors. Then, each investor has a voting right of 1 in 10 and is bound to receive 10% of the profits earned by the company at the year-end. In return, the company raises $10,000 from the sale of the shares in exchange of a promise of dividends and partial ownership of the company. This is the power of shares.In the stock market, shares are valued and exchanged on a second by second basis. New shares are introduced at a price stipulated by the issuing company while existing shares are traded on a price fixed by investors themselves. The price of the stocks of a company on the stock market is, therefore, a reflection of the profitability, stability and status of the company.
What is stock market? It is the market of shares, where share values are indicators to individual company’s performances, the stability and growth of the whole nation’s economy as well.
