The stock exchange is the buying and selling of long-term financial assets (securities) such as stock and shares. There are people who we call the stock brokers. The stock broker is an agent of the stock exchange who buys and sells stocks and shares on behalf of their clients. The stockbroker charges a commission on every transaction.
When you buy the shares of a company, automatically you have become a shareholder in that company. The profit that is declared by the company is usually shared among the shareholders as dividends.
We also have a person who will call a speculator. A speculator is a person who buys shares in a company and is hoping to sell them at a later date for a profit. This type of speculation is very risky, because if a company declares bankruptcy for example that speculator will lose all his investment for the shares bought.
The stock exchange has very great importance which contributes to the development of a nation. Some of the factors are expatriated below:
Stock exchange helps to earn profits.
First stock exchange helps individuals earn a profit on their income when they invest in the stock market and allows firms to spread their risks and receive large rewards which means when an individual invests a certain amount of money in a stock market such money appreciates by any percentage due to the agreement between individuals in a stock market.
Stock exchange contributes to the economic development of a nation.
Second, the stock exchange contributes to the economic development of a nation by enhancing the liquidity of capital investments through the secondary markets mechanism. Many profitable investments require long-term commitments of capital, but investors are very reluctant to relinquish control of their savings for long periods. It means if an individual who invests wants his investment to be profitable, he or she has to be committed. Stock exchange contributes to the economic development of a nation because it enables the government to increase spending through the tax revenue they earn from cooperation that trades on the stock exchange. This means it increases the level at which government provides social amenities.
It nurtures and provides capital.
The stock exchange also nurtures and provides capital to small and medium-scale businesses, firms, or enterprises through the second-tier security market. This also means that the stock exchange provides capital to businesses or enterprises that do not have enough capital to start up a business.
It contributes to the general development of a nation.
Stock exchange contributes to the development of a nation because it provides industrial management with some idea of the current cost of capital and this can be important in determining the level and rate of investment. The stock exchange has contributed to the development of a nation because it enables people to buy goods easily. It also helps us to buy goods and stocks freely and cheaply. The stock exchange has also contributed to the development of a nation by creating job opportunities for people such as stockholders, stock brokers, speculators, and so on.
It is a project of transaction.
The stock exchange has to do with the buying and selling of long-term financial assets (securities) such as stocks and shares. The stock broker will be of help of an agent who buys and sells
Some useful terms of stock exchange
- Stock exchange: This is a place where shares in companies are bought and sold. It may be the businesses actively involved in doing this. It is an exchange of money in terms of buying and selling. Some companies are in exchange, such as banks, oil companies, insurance companies, and so on.
- Selling: Selling is a form of transaction where you give something to somebody in exchange for money, such as goods for money, ingredients for money, or services for money.
- Financial asset: This can be someone or something valuable or useful to somebody or something. For example, an employee in a company can be an asset or a property can be an asset.
- Stock and share: Stock and share can be a supply of goods being available for sale in a shop/store. For example, if you have different foodstuffs for sale in a shop, there are stocks to share.
- Stockbroker: A stockbroker may be a person or an organization that buys and sells shares for other people. The stock broker will find someone you can resell your shares for in need.
- Commission: Commission in this sense is the financial plan and agreement between the businesses and clients or people. The commission may be official or unofficial. If there is any agreement financially between the two parties, a commission has taken place.
- Company: Company in this sense is seen as a business organization that makes money by producing or selling goods and services. Some companies sell and buy shares such as oil companies, banks, and so on.
- Shareholder: A shareholder can be the owner of shares in a company or business in which profits will be shared at the end of a specific time. Shareholders are investors.
- Dividend: A dividend is an amount of the profits that a company pays to people who own shares in the company. Also, in a cooperative society, dividends can be shared with the members at the end of the year or agreed time.
- Declares: This is a means to state, indicate and announce publicly. When the company declares; it states officially.
- Speculator: A speculator is someone who buys shares in a company and holds to sell it at a later date for profits.
- Speculation: Speculation is the activity of buying and selling goods, or shares in a company in the hope of making profits. The important area you will have to take note of is the risk of losing money. For example, as you are thinking of profits in a FOREX trade business, you should be expecting risks too. It applies to every business.
- Risky: “Risky” involves the possibility of bad happening. In this case, if you lose instead of profit, it is where “Risking” comes in.
- Agent: An agent is someone whose job is to manage the job of other people. The agent manages and collects money or shares or commission for his/her services based on the agreement.
- Bankruptcy: Bankruptcy is the state of being bankrupt. It is a state in which a company does not have enough money to pay what they owe. It affects a lot of companies such as banks, agricultural companies, oil companies, etc.
- Investment: Investment is the act of investing money in a business to gain profit after some time. Investment is a way of keeping money somewhere to make returns or profits. The profit depends on the kind of investment and company.
When you buy the shares of a company, automatically you have become a shareholder in that company. The profit that is declared by the company is usually shared among the shareholders as dividends. In this article, we have discussed meanings, the contributions of the stock exchange to the nation, and words and terms associated with the stock exchange. We believe that the learners or students will make use of this text useful.