Stocks

6 Key excerpts on "Stocks"

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  eBook - PDF

  The Stock Market

  • Rik W. Hafer, Scott E. Hein(Authors)
  • 2006(Publication Date)
  • Greenwood

    (Publisher)

  Three Stocks in Today’s Economy Stocks are financial securities that represent claims of ownership. A stock- holder is a partial owner of the firm: the stock represents the investor’s ‘‘pro rata’’ or proportional ownership of the business. A share of stock gives the shareholder a right to a pro rata share of the business’s profits or, in the case of liquidation, the pro rata right to the value of the business’s assets in excess of its liabilities. There are two ways to view ownership rights. One as a going concern in which case the stockholder gets a pro rata share of profits and bears a pro rata share of losses. The second case occurs when the business is liq- uidating or selling itself off. In this case, the stockholder gets a pro rata share of any excess in the value of the assets over the liabilities that have been paid off. A share of common stock also gives the shareholder a right to vote in the election of the board of directors. It is the board of directors who take an active role in seeing that all shareholders’ rights are recognized and maximized. Stocks therefore can be viewed as a contractual arrangement between two parties, the party investing in the firm and the firm itself. The investor’s will- ingness to give up money for the stock represents the expectation that they will receive some future payment that exceeds what they have given up. This expected gain cannot be exceeded elsewhere. On the other side, the firm needed the new funds coming from the investor when the stock was issued. It is willing to agree to turn over at least some of the ownership to the investor in order to acquire these funds. As such, stock is really a security that represents an ownership claim. An important aspect of this claim to the investor is the protection offered by the corporate structure. Shareholders have limited liabilities; that is, the maximum that a stockholder can lose is his or her original investment.

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  Money, Markets, and Democracy

  Politically Skewed Financial Markets and How to Fix Them

  • George Bragues(Author)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  As it is for bonds, though, so it is with Stocks: a not insubstantial part of the government’s meddling must be accepted as a basic fact of democratic life. DEFINING AND CATEGORIZING Stocks By way of a primer for readers that are not entirely familiar with equities, or who may need a refresher, let me begin by noting that Stocks repre- sent ownership in a firm. Ownership will usually be partial and, hence, shared with others. The extent of one’s respective stake is determined by the number of shares one holds and, more importantly, the proportion that number represents relative to the total amount of existing shares. However, stock ownership is not like a typical partnership, where the sev- eral owners are personally and jointly liable for obligations arising from THE STOCK MARKET 121 debts incurred by the firm or any legal judgments against it. Each of the partners—and, for that matter, the single owner of a sole proprietorship— can potentially lose more than what they originally invested in the busi- ness. By contrast, those who share possession of a company through stock enjoy limited liability. Shareholders can at most be parted from the whole amount of their investment in the shares. Their other personal belongings will not be affected if, say, the company is found guilty of a gargantuan environmental crime and is ordered to pay damages of an amount greater than its net worth. This means that the corporation has a legal status fun- damentally distinct from the individuals who own shares in it. From the time that the Dutch East India Company first issued shares to the public in the early 1600s, this limited liability provision has been seen as imperative. No other voluntary mechanism exists to attract large pools of investment capital to sizable undertakings capable of realizing economies of scale. After all, most individuals who buy stock do not run the company on a day-to-day basis.

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  eBook - PDF

  Money for Minors

  A Student's Guide to Economics

  • Marie A. Bussing(Author)
  • 2008(Publication Date)
  • Greenwood

    (Publisher)

  Stagflation was prevalent in the United States in the early 1970s, when oil prices rose significantly, thus fueling prices worldwide and causing economies to suffer. STOCK The issued capital of a corporation commonly referred to as a share. Because stock represents ownership in a firm, stockholders have equity in the company. In the financial world, Stocks are sometimes referred to as equities. Stockholders make money on Stocks by two means: receiving dividend payments—profits distributed to shareholders—and an increased share price. There are two main classes of stock, common and preferred. Common stock is the main form of ownership in a corporation, carries voting rights, and typically pays a dividend when the company makes a profit. Preferred stock pays a fixed dividend and does not carry voting rights. Common stockholders may only receive a dividend if preferred dividends have been paid. STOCK EXCHANGE A market through which Stocks, bonds, and other securities are traded. There are stock exchanges located throughout the world. The three principal exchanges in the United States are the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and the National Association of Securities Dealers Automated Quotation system (NASDAQ). Requirements vary by exchange, but each has rules and criteria in order to be traded on the exchange. Overall, firms tend to be among the largest and most profitable. NYSE is the largest in the world; other major exchanges include Tokyo, London, Hong Kong, and Toronto. Stock exchanges benefit the economy, providing a secondary market in which ownership of assets can be transferred. STOCKHOLDER A person or an organization that owns one or more shares of stock in a corpo- ration. This ownership position is also referred to as a shareholder. Stockholder 107 The famous Wall Street Sign. Wall Street is a city street located in downtown Manhattan in New York, the center of the financial district.

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  Investing For Dummies

  • Eric Tyson(Author)
  • 2020(Publication Date)
  • For Dummies

    (Publisher)

  Companies generally make some profits during the year. Some high-growth companies reinvest most or all of their profits right back into the business. However, many companies pay out some of their profits to shareholders in the form of quarterly dividends. » Appreciation: When the price per share of your stock rises to a level greater than you originally paid for it, you make money. This profit, however, is only on paper until you sell the stock, at which time you realize a capital gain. (Such gains realized over periods longer than one year are taxed at the lower long-term capital gains tax rate; see Chapter 3.) Of course, the stock price per share can fall below what you originally paid as well (in which case you have a loss on paper unless you realize that loss by selling). If you add together dividends and appreciation, you arrive at your total return. Stocks differ in the dimensions of these possible returns, particularly with respect to dividends. Defining “The Market” You invest in Stocks to share in the rewards of capitalistic economies. When you invest in Stocks, you do so through the stock market. What is the stock market? Everybody talks about “The Market” the same way they do the largest city nearby (“The City”): The Market is down 137 points today. With The Market hitting new highs, isn’t now a bad time to invest? The Market seems ready for a fall. CHAPTER 5 Building Wealth with Stocks 95 When people talk about The Market, they’re usually referring to the U.S. stock market. Even more specifically, they’re usually speaking about the Dow Jones Industrial Average, created by Charles Dow and Eddie Jones, which is a widely watched index or measure of the performance of the U.S. stock market. Dow and Jones, two reporters in their 30s, started publishing a paper that you may have heard of — The Wall Street Journal — in 1889. Like the modern-day version, the 19th-century Wall Street Journal reported current financial news.

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  eBook - PDF

  Fundamentals of Finance

  Investments, Corporate Finance, and Financial Institutions

  • Mustafa Akan, Arman Teksin Tevfik(Authors)
  • 2020(Publication Date)
  • De Gruyter

    (Publisher)

  5 Stocks and the Markets 5.1 Introduction This chapter presents some of the features of stock and markets. We first review types of common Stocks. Next, we review various forms of stock transactions. Then we examine initial public offering. Trading securities in secondary markets is also discussed. To understand the trend in the market, stock market indexes are created and are followed by investors. Finally, we discuss valuation principles for Stocks and risks faced by investors. 5.2 Types of Common Stock and Stockholders ’ Rights Common stock represents ownership shares in a corporation and can be divided into special groups, generally class A and class B: – Class A shares its class of common stock, usually retained by a company ’ s founders at the time a company goes public, carrying certain rights not granted to stock available to the public. These are super voting shares to retain control. – Class B shares its class of common stock, usually issued at initial public offer-ing (IPO) or if a company issues new stock at a later date. Foreign companies ’ shares trade in many countries such as the U.S., Poland, and England as a means of securing new funding and a way to finance assets overseas. Some securities are listed on several markets globally. American Depository Receipts (ADR) represent shares of common stock that trade on a foreign stock exchange. Global Depository Receipts (GDR) represent shares of common stock that are listed on the London Stock Exchange . Ownership gives common stockholders certain rights that bondholders do not have. These rights are as follows: – Shareholders (stockholders) vote to select the corporation ’ s board of directors, who exercise general control over the company ’ s business operations. – Shareholders vote on major issues concerning the firm, such as mergers and acquisitions. – Shareholders have a claim on business profits, but only those that remain after holders of all other classes of debt and equity are satisfied.

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  eBook - PDF

  Fundamentals of Financial Instruments

  An Introduction to Stocks, Bonds, Foreign Exchange, and Derivatives

  • Sunil K. Parameswaran(Author)
  • 2022(Publication Date)
  • Wiley

    (Publisher)

  CHAPTER 3 Equity Shares, Preferred Shares, and Stock Market Indices INTRODUCTION Equity shares, or shares of common stock of a company, are a type of financial claim issued by the firm to investors, who are referred to as shareholders. In return for their investment, the shareholders are conferred with ownership rights. A firm must have a minimum of one shareholder, and there is no limit to how many shareholders a firm may have. Correspondingly, there is no restriction on the total number of shares that may be issued by a firm. Large corporations have a large number of shares out-standing, and consequently their ownership is spread over a vast pool of investors. Shareholders are part owners of the company to whose shares they have subscribed, and their stake is equal to the fraction of the total share capital of the firm to which they have contributed. At the outset, when a firm is incorporated a stated number of shares will be authorized for issue by the promoters. The value of such shares is referred to as the authorized capital of the firm; however, the entire authorized capital need not be raised immediately. In practice, often a portion of what has been authorized is held for issue at a later date, if and when the firm should require additional capital. Thus, what is actually issued is less than or equal to what is authorized and the amount that is actually raised is referred to as the issued capital . The value of the shares that is currently being held by the investors is referred to as the outstanding capital . In most cases, the outstanding capital is synonymous with the issued capital. In the event of a company buying back shares from the public, however, the outstanding capital will decline and consequently will be less than what was issued. Shareholders are entitled to share the profits made by the firm, as they represent the owners of the venture.

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