A stock market is a market where company stock istraded between people who want to buy the stock andpeople who want to sell stock. Just the same as a fishmarket where people want to buy and sell fish or a cattlemarket where cows are exchanged between buyers andsellers. Stock is just a slice of a company/organisation, ifyou own over 50% of the stock then you own a company.A stock market is made up of several components ofwhich we will be seeing the major components in thenext few slides…
Stock exchanges are key companies that allow the stock marketto work as efficiently as it does. They list shares prices forthousands of companies, they list the bid/ask prices of shares andenable quick electronic transfers of shares between people. Somestock exchanges you might have heard of include LSE (Londonstock exchange) and the NYSE (New York stock exchange).Companies are vital for a stock market to work! A company mustbe listed as a PLC (public listed company) for people to trade it’sshares at a stock market. To be listed as a PLC a company mustmeet strict financial requirements.
A unit of ownership that represents an equal proportion ofa companys capital. It entitles its holder (the shareholder)to an equal claim on the companys profits and anequal obligation for the companys debts and losses.
Shares are issued by a company to raise money (capital) tohelp plan for future projects or because the owner/s of thecompany want a big lump sum of money for themselves asa reward for the hard work they have put into building upthe company!
Brokers are the middle men between the stock exchangeand the stock buyer. They fetch the buy and sell prices ofstocks from the stock exchange and relay them to thepurchasers. It is a legal requirement that you opena brokerage account to buy or sell stocks.
•A company is making huge profits.•Lots of people want to buy the shares to reap therewards of the profits.•Not many people want to sell the shares.•There are not many shares left.
•A company makes some losses.•Lots of people want to sell the shares.•Not many people want to buy the shares.•There are too many shares.
However there are several external factors that affect acompany’s stock price. One factor that we have all witnessedrecently is the recession. Others include inflation rates,interest rates, job cuts, natural disasters, company mergers,changes in company