What is The Stock Market?
The word stock refers to a supply. You may have a stock of pens in your desk, or a stock of towels in your cabinet. In the financial Industry, stock refers to a supply of money that a company has raised. This supply comes from people who have given the company money hoping that the company will make their money increase. A market is a public place where things are bought and sold. The term “stock market” refers to the business of buying and selling stock. Why do companies issue stock? If a company wants to grow For example; build more factories, hire more people, or develop new products, it needs money. It could get a loan from a bank. But then it would owe money. By issuing stock, a company can raise money without going into debt. People who buy the stock are giving the company the money it needs to Expand. Not every company can issue stock. A business owned by one person (a proprietorship) or a few people (a partnership) cannot issue stock. Only a corporation can issue stock. A corporation has a special legal status its existence does not depend on the people who run it. Under the law it is separate from the people associated with it, and has special legal rights and responsibilities as well as its own unique name. Why do people buy stock? Owning stock in a company means owning part of that company. Each part is known as a share. If a company has issued 1000 shares of stock, and you bought 100, you own 1% of that company. People who own stock are called shareholders. Shareholders hope the company will earn money as it grows. If a company earns money, the Shareholders share the profits. Over time, people usually earn more from owning stock than from leaving money in the bank, buying bonds, or making other investments.
