Stock Market for Dummies ? Basic Explanation of Stock Market Terms
Stock Market for Dummies – Basic Explanation of Stock Market Terms
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Home Page > Finance > Investing > Stock Market for Dummies – Basic Explanation of Stock Market Terms
Stock Market for Dummies – Basic Explanation of Stock Market Terms
Posted: Jan 11, 2010 |Comments: 0
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Most of these terms are used in other sectors of the business world. However, they all mostly mean the same thing in the stock market as well. For dummies (stock market dummies of course) who know very little to nothing about these terms, at the end of this article, it should be clear to you what each means. They are:
Stocks – You, probably, often hear that new stocks or shares are issued everyday by a number of companies, but still the question “what is a stock, and why do companies issue it?” remains. The answers to the questions are simple: 1. Stocks can easily be defined as a tiny fraction of the company that’s up for sale to people like you. 2. Companies issue stock as a means to raise money to help finance the smooth running of their daily productions and activities. Clear enough? It should be since this is a snippet of what there is for stock trading for dummies. Capital – Just like every other business situation, in stock trading, the term capital is used to describe “the money invested by companies or individuals to start a business”. If a company issues a stock before it begins operations (highly unlikely except among individual acquaintances), then the revenue generated by selling the stocks could be seen as the capital required for starting the business.
Equity and Debt – Since this article is about stock trading for dummies, you’d easily be forgiven for wondering what these terms, especially “Equity”, means. Basically, there are two ways of which companies can raise money. They can do this by either selling all their stocks to get the required resources or by borrowing money with promise to pay it all back later with interest. The
first methodology is called Equity while the other is called debt. Most companies, or even individuals, do as much as they possibly can to avoid debt; which is why they offer their stocks in the stock market to begin with.
As far as this stock market for dummies article goes, the main benefit of stock trading is that shareholders are eligible to share in the profits of the company. In addition, if the price of the stock rises, stockholders also benefit from it, especially if they choose to sell their shares at that point.
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