What is a Stockexchange and Why is it needed??

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.

1. If you want to sell the share, you can do it in share market where the buyer meets the seller
2. Corporations can raise a huge capitals by dividing the ownership into multiple shares
3. 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 !