Let’s imagine company called X, which has an amazing new product. The rapid growth in demand for new product requires building a new plant.
Unfortunately, the company can not afford to spend large sums of money, which leads the managers to ask a loan from the bank. However, it takes years to repay the entire loan, not to mention the high interest payments.
A good way to increase capital for the construction will be needed to ensure the company’s share of the public, or, in other words-for investment in the public sector can become a partner. This can be done by some of the company’s shares (also known as stock) to investors through the stock market (NASDAQ), also known as the Exchange.
How shares are traded
The company decides shares or “go public”. After a public company goes through a process of primary placement of shares (IPO), their shares are traded daily in 1 of the exchanges of stock market, such as, NASDAQ, AMEX, NYSE and other exchanges worldwide. Share holders can also offer the new investors to buy part of their business to sell part of its stockpile.
It seems simple conclusion: Buy low, sell high, buy their stocks relatively low prices, wait till the price to raise and sell at higher prices. The difference between the price they paid to buy and price you receive when you sell is your profit. The main question is how biggest profit possible. First, we need to understand how the price per share.
What determines the share price?
Stock prices are determined by combination of factors, which no analyst or other market participants, experts could predict. In general, prices reflect long-term revenue potential of companies. Investors are attracted to the shares of companies and they expect to have significant benefits in the future. That is why many people want to buy shares of these companies which lead the demand to be increased, hence, the increases in the prices. On the other hand, investors want to buy shares of companies with prospects for income of the poor.
In the short term, stocks are usually very volatile, mainly because of the current immediate availability of large amounts of information easily accessible via the Internet.
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