Stock
From Economypedia.com
Stock is a kind of investment in a company, which is assumed to make profits in future. Stock can be compared with a loan, which does not carry pay back guarantee. Any company issues a number of stocks for public. Investors in exchange of money gets certain number of stocks of that company. Stocks issued by any company provide the investors with ownership in that corporation.
There is a simple way to get the concept of stock. Lets deal with an example, where a company named “Apollon” sells its stock at a rate of $10 per stock. An investor pays $30 and buys 3 shares of Appollon stock. Thus, stock is a generic term used to represent a bit of the ownership of a company. [1]
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[edit] Types of stock
On the basis of the ownership powers, stock can be differentiated as voting stock and preferred stock.
[edit] Voting stock
This type of stock carries voting powers. Any investor if possesses a certain number of voting stocks gets the power to vote on matters of corporate policies of any company. The investor can also vote for appointing members for board of directors of the company.
[edit] Preferred stock
Preferred stock is a higher-ranking stock. Owners of these stocks get special powers, which is negotiated by company owner and investor himself. These types of stocks do not carry any voting rights but carry superior rights like dividends and other bonuses. The terms and condition between investor and issuer of this of this type of stock is stated in a "Certificate of Designation".
[edit] Uses of stock
Stock represents a portion of ownership in a company. Stockholders bear profits or losses of the company. Continuing the example used in above section, we can understand uses of stock in a better way. An investor after paying $30, owns three shares of stock of Apollon. If the company prospers and raises its stock price to $15 per stock, investor can gain money. He can sell his three shares at $15 and earn $45, which is a profit of $15. If investor has faith in the company and assumes that the company will prosper further then he waits for the stock prices to rise even higher. If the adverse happens that is company incurs losses and stock prices lower, then stockholders have to sell shares at a lower price. In this way, share holders also bear loss of the company. [2]
[edit] See also
[edit] References
1. En.allexperts entry on share. Retrieved on September 05, 2008.
2. Socialstudiesforkids entry on stock market. Retrieved on September 05, 2008.
[edit] Further reading
- Article in Onesmartclick
