By offering quality goods and services, corporations tend to earn huge profits thus attracting more investors to invest and expand the organization. When the expansion of an organization occurs, more jobs are provided and which in the long run contribute to the enhancement and stabilization of the economy. Corporations invest in real assets, which generate income. Some of these assets, include plant and machinery, which are tangible; others are brand names and patents, which are intangible. Corporations finance their investments by borrowing, by retaining, and investing cash flow, and by selling additional shares of stock to the corporation’s shareholders thus rotating cash and stabilizing the economy.
It is a common terminology that is heard frequently in terms of the daily performance of the stock market whether it was up or down. Another terminology is Preferred stock, which varies in comparison to common stock investors are paid dividends consistently. Dividends is used often with the stock market, dividends are profit you receive when the company makes a profit. If the company does not make a profit, you will not receive a dividend reimbursement. Payments can be reinvested, which helps build wealth because you are increasing your portfolio.
This does not necessarily depend on externalities but by increasing the liquidity of firm investment, reducing productivity risk, and improving firm efficiency, stock markets encourage firm investment. This stimulates human capital production and growth. Holmstrom and Tirole (1993) emphasize that a firm's ownership structure influences the value of market monitoring through its effect on market liquidity. Considering an agent holds some fraction of the firm as a long-term investment. If he decides to decrease his ownership, there will be more shares actively traded and the liquidity of the market will go up.
The other element that makes stock markets more attractive than different sorts of investment is its liquidity. Many people invest in stocks because they need to be the proprietors of the firm, from which they advantage when the organization pays dividends or when stock costs increases. Be that as it may, numerous investors purchase stocks with the end goal of control over the organizations. (Luu, T B., 2014) 2.1 Attitudes, perception, and behavior of Investors toward stock
There is a connection between the stock market and the economy. It is noticeable how economic activity influences stock prices. The current state of the economy has major influence over how much money is being deposited into the economy as well as a consumer's confidence in their income. Whether an individual invests in the stock market or not, it will have an impact on everybody and every company. Every investor’s goal is to gain the most money from the stock market.
Based on Lenuja Carp (2012), a well-functioning stock market has an important contribution to sustainable economic development, which it can convert the national economy to be more attractive to attract more investors in order to boost the economic growth. The stock market development promotes the investors to access to the financial resources, which is encouraging more savings from the savers, and efficiently assign the resources to the investment in domestic business through financial institution, financial market and financial instruments, which may in turn boosting the national and foreign investments, and lead to economic growth. Levine, Zervos (1996) and Demigurc – Kunt and Levine (1996) has indicates that there is an existence of causal relation between the stock market development and the economic growth. Liquidity which act as a stock market indicator, play a key role in accelerating economic growth. Levine (1997) indicates the impact of the stock markets on economic growth by increasing the capital investments liquidity which assuming that higher degree of liquidity will allow the savers to sell their shares easily to generate the economic
Time Value of Money One might know that time is one of the most valuable assets in our lives. In the financial world the value of money is linked to time, primarily because investors expect progressive returns on their cash over periods of time, and they always compare the return from certain investments with the going or average returns in the market. Inflation on other hand erodes the purchasing power of money causing future value of one dollar to be less than the present value of a dollar. This paper will examine time value of money and the applications that determine successes or failures. An examination of the different vehicles that can be used to generate financial security for corporations and individuals will be provided.
Significance of Stocks in Personal Finance Personal income is considered to be a person’s total earnings which can be obtained through wages and salaries, personal business activities, social aid and investment. The choice to invest one’s finances rather than spend on consumption has an overall impact of increasing income as a result of future cash inflows from the invest... ... middle of paper ... ...g is also important in fulfilling financial obligations such as debt capital, annuities as well as savings. An effective personal financial plan should manage risk through diversification of investment capital, and the stock market provides investors with a viable option for diversification. Investing in stocks is considered one of the most profitable alternatives of personal financial planning, and is generally included to financial plans as an investment vehicle for additional income streams. Investing in stocks also has several benefits, key among them being increasing current and future cash inflows from investments.
Horizontal mergers are likely to create value for shareholders because they combine firms in the same industry, thus the opportunity for synergies is very high. As competition decreases, market share and pricing power increase. Horizontal mergers often create economies of scale, allowing companies to offer the same product at a lower production cost. 4. The acquiring company is forced to compete against other firms, which drives down the gains that its shareholders can realize from the deal.
The most common threat in stock investment is about losing money (little, 2011). Moreover, stocks are bought and sold in a specific place called stock Market which is conquered by traders who hypothesize on price of shares to make profit. Shares themselves are intangible assets and the annual profit paid out is called dividends. Moreover, the price of share depends on the supply and demand within the market. Stocks are valued by two types, first by cash flows, sales or fundamental earning analysis and second valuation is the amount an investor is willing to pay for stock and the other investor is willing to sell stock for a particular price or demand and supply of stocks (freefinancialadvice, 2002).