Net profit in a company is divided in two destinies such as through investment of the profits on the firm. When a firm files for bankruptcy and due to the share of stock indicates a fraction of it the shareholders are probably entitled a share that is left in the firm (Auerbach, 1983). A firm may files for bankruptcy due to lack of financial health, hence the firm 's belongings do not even suffice provided enough support to pay debt. On the other hand, the firm takeovers might take the form of public offerings which is provided by the firm 's to purchase the victim 's stocks at the irresistible high prices.
Initial public offerings (IPO) are identified as the most common way stocks which appear in the markets. This issue emerges when a firm intends to issue stocks, but give away a part of it to the public with an intention of getting a return of money. Public gains a larger part of the firm through cost of paying money for it hence the firm progress on obtaining massive amount of money, through the way of giving it away towards ownership whereby the profits is within the dividends.
Outside IPO 's, the stock may be bought and also sold within the stock exchanges. Certainly these are termed as physical or virtual in such a way that where stocks are assigned a selling price a...
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...is aspect, the risk that rise interest rates may pose to a fund whose portfolios include longer-term and the fixed income securities.
Current risks associated with stocks
There are many risks related to stocks securities such as market risk, inflation risk and liquidity risk. In market risk, the investor may possibly experience losses due to the factors that affect overall performance of the financial markets (Siegel, 2008). For example, there are stock market bubbles and crashes that outline the market risk. The inflation risk is another risk that is associated with stocks. It involves changes of the purchasing power as a result of inflation.
Lastly, liquidity arises when an investment has not been bought or lack of efforts to minimize losses. The fact is that markets that experience this kind of risk do not invest in the risk diversified markets over the stocks.
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