Definition of a Stock Essay

Missing Works Cited
Length: 897 words (2.6 double-spaced pages)
Rating: Orange      
Open Document

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Definition of stock.
A stock (also referred to as share or equity) is a security issued by a company that represents a stake of the ownership rights in the assets of the company and a share of its profits after payments of corporate liabilities and obligations. Stocks are sold and bought on an exchange. Corporations issue stock in order to raise capital to finance their operations. A stockholder is an owner of a company. A stockholder is an owner of a company’s property, which is held in the name of the company on behalf of its stockholders. Other securities such as bonds and notes differ from stocks, since they are corporate obligations and do not represent an ownership interest in the company.
There are several types of stock but the two most typical are Common and Preferred stock. An owner of common stock is entitled to voting right at stockholder’s meetings and a share of dividend. Generally, preferred stock do not have voting rights, but holders are entitled to priority over holders of common stock should a company go bankrupt and is liquidated. Shares of stock a reflected in written instrument referred to as stock certificates. Each share represents a percentage of ownership in a company.
The value of a share is determined by the value of the issuing company, its profitability, and future prospects. The market price reflects what purchasers are willing to pay depending on their evaluation of the company’s prospects. If a company issues 10000 stocks in total, then each stock represents a 0.01% ownership in the company.
Stock Split
Stock split is done to make shares affordable to those investors who could not afford it due to high prices and to infuse liquidity. Stock split reduces the market price of a stock without any cha...

... middle of paper ...

... to smaller investors who could not afford it. This reason is psychological in the sense that, as the price of a stock gets higher and higher, average investors will consider the price of the stock to be too high or unaffordable. Splitting the stock will therefore entice new investors who will perceive the stock to be at an attractive price level, even though the value of the stock doesn’t change. Existing shareholders may also have the feeling that they now have more shares than they did before, and if the price of the stock increases in the future, they now have more stock to trade.
Another is that, the liquidity of the stock increases. This means that an investor can easily trade shares for cash when they want to get out of an investment.
Finally, stock splits create a positive image for investors because they believe a company that splits their stock is growing.

Click the button above to view the complete essay, speech, term paper, or research paper

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

This essay is 100% guaranteed.

Title Length Color Rating  
The Informational Efficiency of the Stock Market Essay - Since the existence of stock markets, people tried to formulate models that reflect and deal as a guideline to understand how markets function. The concept of market efficiency is a major and broadly accepted hypothesis that mainly developed since the formulation of the market efficiency hypothesis by Eugene Fama, in 1970. Although the term market efficiency to economists is also a broadly known term referring to operational efficiency, this paper concentrates on the efficiency of stock markets or to be more precise the informational efficiency of the stock market....   [tags: market efficiency, stock market, eugene fama]
:: 24 Works Cited
1636 words
(4.7 pages)
Powerful Essays [preview]
Stock Essay - An active investor invests his all resources to determine the fair value of a stock. However, most of the times, he is unable to acquire a piece of information that is not available in the public domain and that information may alter the probability distribution of his investment decision (James Lorie, 1980). In this phenomenon, an active investor may infer the non-public information by considering corporate insiders’ action in their own stock. Many previous studies (e.g., Jaffe, 1974; Finnerty, 1976a, b; Seyhun, 1986, 1988a, b; Rozeff and Zaman, 1988; Lin and Howe, 1990) document that corporate insiders pursue special information and on that special information, not only insiders are able t...   [tags: Economy] 1100 words
(3.1 pages)
Good Essays [preview]
Changing Raw Material Into Standard Stock with Primary Process Essay - 1.a Define and describe primary processes A Primary Process is changing a raw material into a standard stock. This is a rather ambiguous definition as some processes can be a primary process or secondary process depending on the product being produced. For example pig iron from a blast furnace can be standard stock (for cast iron) or it can be sent to a BOS furnace for further processing into steel, which is the standard stock in this case. Some basic examples of primary processes are: Wood Trees are cut down from native, regrowth or plantation forests....   [tags: casting, cutting, moulding] 2690 words
(7.7 pages)
Powerful Essays [preview]
Taking Stock of Things Essay - Which end of the bull does our concept of market capitalism come from. Ask your typical American, and they typically term the markets as arcane playgrounds of the wealthy. Ask your typical investor and they consider them a means to an income through trading. But both these modes of thought disparage what financial markets really represent: A sphere of public concern, which guides our collective economic endeavors. By shifting our concept of the markets and therefore how they should function it is within our power to broaden our collective awareness, and to bolster our means to collective self determination....   [tags: investors, wealthy, financial market] 633 words
(1.8 pages)
Better Essays [preview]
Essay on Internal Auditing: Stock Market and Fraud - Definition of fraud: It is the conscious intention to steal or cause an individual to lose or give up something that is rightfully theirs. Stock Fraud: When brokers or people in the stock market influence or make investors buy stock based on false information which is a major violation of the laws put in place in order to protect us from these scandals and in usual cases, it results into a loss for investors. The main targets of stock market investment fraud are seniors. In the market it is estimated that there is a loss of about 40 billion dollars every year and 1 to 3 billion from that amount is from microcap fraud....   [tags: ENRON, investors, false information]
:: 4 Works Cited
1250 words
(3.6 pages)
Strong Essays [preview]
Definition and Phases of Project Management Essay - ... Project Must be complete within the giving budget. Project must be within the scope. Project must be according to the standard of the customer quality or as per customer demand. Phases of project Life cycle There are four types of phases in the project Life cycle all are mentioned bellow: 1. Initiation Phase 2. Planning Phase 3. Execution Phase 4. Closure Phase Initiation Phase: It describes the initial phase of your current project. In this phase you define scope of the project and the purpose of the project....   [tags: project management triangle, planning] 953 words
(2.7 pages)
Better Essays [preview]
Essay about Stock Asset Returns Are Predictable Part 1 - 4. THEORITICAL BACKGROUND Since the originative works of Fama (1965 and 1970), where an efficient market from the informational execution point of view was defined as one where “stock prices ‘fully reflect’ all available information” (Fama 1970) and market efficiency was categorized into three levels: weak-form, semi-strong form and strong-form. First of all, the information set through weak form efficiency, reflects only the historical prices or returns. Second of all, the information set in semi-strong form efficiency, contains information available to all market participants....   [tags: finance, classifications, efficiency] 1969 words
(5.6 pages)
Powerful Essays [preview]
Essay on Bubbles in stock markets - ‘The stock market’s movements are generally consistent with rational behaviour by investors. There is no need to invoke fads, animal spirits, or irrational exuberance to understand the movements of the market.’ Discuss in relation to the information technology bubble and its collapse. Introduction In a perfectly efficient market, it is assumed that all investors have access to all available information of future stock prices, dividend payoffs, inflation rates, interest rates and all other economic factors that affect the present prices of stocks....   [tags: essays research papers] 1602 words
(4.6 pages)
Powerful Essays [preview]
The Future of High Definition Television Essay examples - The Future of High Definition Television “DTV is a much bigger step for television than the change from black and white to color” (Epstein, 12/99). The idea of a “digital television” came about nearly a decade ago in the early 1990’s when scientists realized that much more data could be sent to televisions if it was in a digital format, or a long series of 0’s and 1’s. This is the same method that computers use to send data and this method is very efficient. In fact, the data stream going into the television would be so great that 5 or 6 different channels could be broadcasted at the same time on the same frequency, giving viewers more options....   [tags: Expository Essays Research Papers]
:: 5 Works Cited
1642 words
(4.7 pages)
Strong Essays [preview]
Essay about Definition of the English Language - Definition of the English Language The many varieties of dialects and accents of the English language make it difficult to put together one exact definition of what the English language is when looked upon as one unified language. One has to look at the evolutionary development of the language. It is therefore necessary to consider the historical events to grasp the coherence of the present situation regarding the English speaking nations of the world. The history of the English language is of significance because English is spoken more frequently than any other language except Chinese, (1)....   [tags: Papers English Linguistics Essays]
:: 3 Works Cited
1108 words
(3.2 pages)
Strong Essays [preview]