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Introduction to the Stock
Stocks are a share of ownership in a company.
When you own something, you can enjoy the
benefits of what you own.
One benefit of owning stock in a company is
that you are entitled to receive some of the
profits that company makes.
However, when you invest in the stock market,
you take a big risk, which is the chance of
losing money.
You can become a part owner of a
company if you buy stock in that company.
But the many other people will also have
bought stock in that company. So you are
then only one of many people who share
its ownership. That is why when you buy a
stock in a company, you buy something
called shares.
When you buy shares of stock in a
company, you own a little piece of every
part of the company. Therefore, if you
bought stock in McDonald’s, you would
not only own 1/694 millionth of every
hamburger, you would also own 1/694
millionth of the company’s buildings,
equipment and raw materials.
Each share of stock you own entitles you to one
vote for the company’s top managers, or
directors. These managers run the company for
you, so you do not have a big influence on what
the company does or sells.
Why would a company want to join the
stock market in the first place? What would
be the advantages of selling shares of ownership
in a company?
Use of Stock Revenue
When a company sells stock it takes more
revenue than it would have had it not sold
shares of stock. The company can then
put that money back into improving the
business by building more restaurants
improving its equipment or creating and
selling new products.