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Understanding The Stock Market
The basic function of the stock market is to provide capital resources for corporations that seek capital to expand their operations and finance their growth. If you make your money available to theses companies, you help them expand and prosper. Companies that issue stock shares to the public are considered "publicly held" or "publicly traded" companies. Stock shares represents ownership of a corporation. As a shareholder, an investor owns a portion of the company's assets and profits. With ownership comes risk and a shareholder assume the primary risk if a business does poorly. However, they also stand to make the greatest return if it succeeds. If he is smart, the shareholder would be wise to be understanding the stock market too.
When an entrepreneur starts a company, he often looks to family and friends for start-up capital. As the company grows, it will need more money, or in other words capital. Those who survive those tough early years, when most businesses fail, will look for a bank loan. Loans carry high cash costs, in the form of interest payments. Eventually, if the company grows enough, its owners may choose to issue stock shares in the public markets. Understanding the stock market is very important to know for these entrepreneurs.
Initial Public Offering ________________________________________________________________
To go public and issue an IPO, the company must use and find an Investment Banking firm that is willing to underwrite the public offering. The Investment Banking firm, or underwriter, will do their best to sell the shares. They may reserve the right to sell the offering on an all or none basis, which means that if they cannot find buyers for all the shares to be issued, they may call off the entire offering.
The underwriter then attempts to sell those shares to the public for a higher price, thus profiting from the transaction.
This is the quintessential guide for anyone interested in gaining insight about the financial and stock markets. This book is awesome and is very Easy-reading. It gives both newcomers and seasoned veterans valuable insight and quick reference reminders covering the entire investment and financial spectrum from stocks, bonds and mutual funds to futures, options and the international marketplace.
Next: Shareholder Classifications________________________________________________________________
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