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Business News of Thursday, 25 November 2021


Business word for the day - Stock

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A stock is the value of the fraction of an individual’s ownership in a firm or company. This represents or gives the owner of the stock a stake in the company’s assets and profits.

Stocks are traded on the stock market, predominantly stock exchanges. They can also be bought from online stock brokers.

Corporations issue (sell) stock to raise funds to operate their businesses. There are two main types of stock: common and preferred.

Common stock is a security that represents ownership in a corporation. They have the right to elect the board of directors and vote on corporate policies. In this type of stock, shareholders have higher rates of long-term returns.

However, in the event of liquidation, common shareholders have rights to a company's assets only after all other types of shareholders i.e. bondholders, preferred shareholders, and other debtholders are paid in full.

For preferred shareholders, they have priority over common stockholders when it comes to dividends, which generally yield more than common stock and can be paid monthly or quarterly but do not have voting rights, unlike common shareholders

Units of stocks are called shares. A person is a shareholder of a company if they have bought a fraction of ownership of the company.

However, they do not own the company but rather the shares that they have bought.

According to Investopedia, Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets and earnings.

The stock transactions must conform to governments regulations on stock trading to provide security and shield investors from fraudulent activities.

Sometimes, people trade in stocks on the premise of false information from unscrupulous persons. When this happens the investors or buyers of the stock run into losses and mostly violate security laws. This is known as Securities fraud, stock fraud or investment fraud.