A stock market can be defined as a place to buy or sell the stocks, debentures and derivatives for an agreed price. These are called securities; the stocks of these listed companies or corporation are traded over the counter in these stock exchanges. New York stock exchange or NYSE is the American stock exchange. The New York, American, NASDAQ, London and Tokyo stock markets are called collective exchanges.
The government, public sectors or private concerns which want to expand its operation or facility will not have sufficient funds for the same; even the banks cannot provide such big loans. So the companies raise the capital by selling the securities to the public. The interested buyers buy the stocks through the stock exchanges. Sometimes the value of the stocks shoots up on the first day of a public offer, it’s based on the company fame and the demand it has in the market.
The stocks are also called as financial instruments, sold to the buyer, by the company, through the stock exchanges. When an individual possesses stocks of a particular company he has ownership over the company and its assets. However, it’s just residual ownership; he may not be a deciding authority. The company has the management which has board of directors these directors are normally major stock holders. An individual who has maximum stocks is a legitimate owner. But the owner alone cannot make the decision; it is always a collective decision of the directors who are the stake holders. The profits earned by the company are shared among the stock holders in the name of dividends.
The bonds and debentures are securities, which have fixed returns, are pre-planned; the bond holder knows the earning he/she is going to make. He receives the interests every year, based on the face value. When the maturity date is attained, he/she will get the refund of the face value.
