|What stock market means? Stock Market In Finance|
Stock Market In Finance
I will try to explain what exactly the stock market is and how does it function in a very simple manner. Let’s start the stock market is actually
The marketplace where buying and selling of shares are facilitated how does this work. Let us take an example of Asia’s largest stock exchange
That is the Bombay Stock Exchange. There are about 5439 companies are listed. What are these listed companies means just means that these companies are allowed to generate funds from the public.
A company to be a listed company needs to follow some procedures and some rules and regulations are there which they must abide by to be listed on the stock market.
Stock market is and how does it function
These companies would then issue shares to the public to generate funds for their business. Now, issuing shares is like transferring a portion of ownership in the company.
The profits with the company would earn shareholders would also have the portion in that profit. This happens in the condition of losses as well. Shares are generally issued in denomination,
Let’s say if the company wanted to generate a fund of rupees 50 lakhs from the public, and it gave the price of each year rupees 10. So the number of shares it would issue will be five lakhs at rupees 10 each,
Someone from the public if wanted to invest rupees 10,000 in the shares, would be able to buy 1000 shares at rupees 10 each. This way the shares are issued to the public and the required fund is generated company then invests these funds in their business.
And if it earns profit out of its market price rises, and if the loses, the market price of the shares falls. This is how the market price is determined and the rise or the fall in the share market price that is indicated on the Sensex,
Which is the index of the Bombay Stock Exchange Let’s have a quick summary of companies issue shares to generate funds from the public when they are in the need to make any big investment project and they are not,
They’re running short of the funds so they could go to the public and issue their shares to provide them the portion and their company’s profit in the company’s business, and thus they could generate funds from them,
Shares provide ownership to the shareholders in the company’s profit or loss, the income received from the ownership of shares is referred to as dividend.
The dividend is given to the shareholders who are holding shares who are holding some amount of portion, who have given funds to the company’s business.
They are rewarded with a dividend is not just one reward the shareholders can also gain with the rise in the market price of the share,
They could sell their shares at a higher price on which they bought so just to foresee if they bought the share at rupees 10. Each, and now the market price of the share has priced to rupees 30 Nice.
The difference between that rupees three would be the gain to the shareholders, so they could sell that share at that market price and could have the gain the funds generated is then invested in the business by the company where it might gain or lose,
So the funds generated through the issuing of shares are invested by the companies in the business and the big projects where it might gain or lose
And this would be reflected on Sensex by showing the rise or fall in the share price stands in a very simple manner what exactly the stock market is and how does it function?