We shall
understand the need of stock market and what it is in this post. Lets discuss
some simple scenarios for better understanding.
1) Let us
assume, you, me and one of our friends start a business. We put equal share of
capital. After a period of time, you want to exit out of our business and want
your share. At that point of time finding another partner immediately and giving
away your share is very tough.
(Share is
the your share of Ownership)
2) We
have got a great idea to expand our business that needs huge capital
investment. We are not able to implement the idea due to lack of capital.
Raising a huge sum of money in a short period is very tough.
3) A
common man has a small investment; he wants to invest a part of that in a large
corporation.
A
solution for all the above scenarios is the need of Stock Exchange or we can
call is Share market.
Share
market is a place where the ownership of the company is divided in to multiple
shares. Say for example, A company's market capitalisation is $10 Crores and it
has One crore outstanding shares, then each share costs $10. You can own one
share for $10.
- If you want to sell the
share, you can do it in share market where the buyer meets the seller
- Corporations can raise a
huge capitals by dividing the ownership into multiple shares
- A common man can invest in
large corporation by buying a small number of shares
Share
Market is the place which facilitates all the above. It is a place where the
corporations raise capital and the shares are traded.
We shall
discuss and learn more on stock exchanges coming posts. Happy learning !
