Any business needs money or capital whenever it has to start its operations or expand its business operations. Thus, in order to raise this capital for a business start-up or expansion, the corporation would offer shares of stock for sale to the public. By selling these shares or stock to the public, the company is able to increase its finance reserves and also get the necessary funds to start operations or expand its operations. So, any individual who purchases a ‘share’ or ‘stock’ of a company becomes a part owner of a portion of that company, based upon the number of shares purchased compared with the number of shares that make up the company’s total stock offering.
The trading of stocks at both national and international level is carried out on several exchanges known as ‘Stock Exchanges’. The determination of which stock exchange the stocks of a company would be traded on depends on the size of the corporation and the location of the company’s headquarters. The stocks listed on these stock exchanges are traded by licensed brokers who work for stock brokerages.
After taking this course, students should be able to understand the important concepts related to stocks and investing.
Dividends and capital gains are taxed at a lower preferential federal tax rate and so if tax planning is done wisely, then stocks can prove to be tax-efficient assets. Common Stock is a ‘voting stock’. Hence, any individual who has purchased the common stock of a company is entitled to vote for appointing the officers of the company and it’s Board of Directors. Thus, common stock is the ownership share in publicly held company. Common stock holders have a residual claim on a company’s assets. Each common stockholder or shareholder of a corporation is entitled to certain rights and obligations. Thus, each common stockholder has the right to vote. Moreover, if a common stockholder is not able to vote in person, he can give a written consent to give permission to someone else to vote on his behalf as a proxy.
