Fargo Wells Financial

Stock Faq

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A stock is also known as a share. They refer to ones own investment in a company. Stocks are tagged by the prices on them. The better the company the higher the price of the stock. Owning a stock does not mean you own a whole company, but rather that you own a small piece of it. It’s the amount one is investing in the company to share their profits or losses. Of course stock investors are provided with some privileges of sharing profits and voting for management.

Stock influences the economy and also the currency value of a country. The better the stock prices are the better the stock market is. The better the stock market is the better the economy of a country is. Usually stock values are most fluctuating. No one can exactly say when a stock incurs profit. Many invest in stocks, some become multi millionaires overnight, and some will be bankrupted overnight. That’s the power of a stock. Now the question that comes into every ones mind is how this powerful and most fluctuating stock looks like. It’s just a piece of paper that has proof of ones owner ship on it. Now days it is being stored as an electronic image rather than as a paper.

Stocks are of different types, there is Common stock and preferred stock. Common stocks are considered as the most risky type of stocks. If the company is in profits they common stock holders entail greater benefits but if the company is in losses then common stock holders will loose the most. On the other hand preferred stocks are less risky. Preferred stock holders have some degree of ownership on the company and under any circumstances they are assured of certain amount of payback. If the company is in losses after the debt holders it is the preferred stock holders that will be paid.

But how these stocks are traded? It’s quiet confusing. They are usually traded in a stock market where buyers and sellers sit together and decide what should be the price of a stock. Sometimes this kind of trading is also done online. They are the ones who are responsible for change in the value of stock. If there are many who want to buy a stock than those who wants to sell it then the price of the stock goes up.

On the other hand if there are few people to buy a stock and more to sell a stock then obviously the price of the stock go down. What makes people to buy a stock? It is just the hope to incur profits on them. If the company is in profits then others want to buy that stock because they can incur profits on it. So they stock value increases. But if company is in losses then no one wants to keep those stocks and they try to sell them but very less people attempts to buy them hence price of a stock goes down.

4 Responses to “Stock Faq”

1. MIZZ.TIP Says:
   November 26th, 2008 at 7:37 pm

   stock!!!!!!!!?
   the hamilton brush company issued 2,500 shares of commom stock worth $100,000.00 total.what is the par value of each share?

   A.25.00
   B.40.00
   C.400.00
   D.250.00

2. Kir Says:
   November 27th, 2008 at 12:39 am

   if this is for school, the answer is $100,000/2500sh = B; however, that is also totally WRONG in the real world. Most stock today is issued as low-par or no-par value…so the real answer is E) $0.
   References :

3. crosseyedlemon Says:
   November 27th, 2008 at 12:41 am

   This question is a bit confusing since you seem to be asking two different things. "Par value" would indicate that you want to know the value if the shares were bought in 100 group lots. D would be the right answer in that case. The value of a single share on the other hand would be B.
   References :

4. BigDog507 Says:
   November 27th, 2008 at 12:43 am

   Par Value is the selling price orignally asked when a stock is first issued. Assuming that the stock is "worth" the par valueat the time it is issued then the answer is B but par value for a stock doesn't always reflect the worth of a stock. Stocks are bought and sold most of the time at over par although they can be bought under par sometimes. Par Value doesn't change but the worth does. If a company issues 1,000,000 shares of stock at par of $5 they generate $5,000,000 of capital to use for their company. If in the next 5 years the company is growing and investors think the company will continue to grow and pay good dividends they may be willing to pay $10 per share for the stock. The company does not get this money and the Par Value doesn't change. Some of the investors who bought the original shares at $5 may be willing to sell them for $10. They are the ones who make the gain.
   References :
   Investor ofr over 30 years

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