Economics - How the Stock Market Works英文资料

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1、HowtheStockMarketWorksWhyDoCompaniesIssueStock?Companiesthroughouttheworldissuenewstockshareseveryday.Butwhatisstock,andwhydoesacompanyissueit?Tohelpyoutobetterunderstandtheseimportantconceptsinthistutorialwewilldiscuss:•WhatisCapital?•Equityvs.Debt•WhyDoCorporationsIs

2、sueStock?•AdvantagesforStockHoldersLetusbeginbydefiningthewordcapital.WhatIsCapital?Let'simaginethatyoudecidetostartupyourownicecreamshopbusiness.Youwillneedtoinvestinequipment,foodsuppliesandproperty.Allthemoneythatyouinvesttostartyourbusinessiscalledcapital.Essential

3、ly,thecapitalofabusinessconsistsofallofitsassets(oritemstoassistinthecreationofwealth).Whatifitdawnsonyouthatyoudon'thaveenoughcashtobuyalltheneededassets?Let'sseehownewbusinessesandcompaniesdealwiththisproblem.TopEquityvs.DebtTostartanewbusiness(orfundanewproject)acom

4、panycanraisemoneyintwoways-bysellingsharesofequityorbyincurringdebt.Iftheownerofouricecreamparlorinvestedalltheirownsavingstobuythematerialsnecessarytostartthebusiness,theymadeanequityinvestmentinthecompany.Equityissimplyownershipofacorporation.Typically,ownershipunits

5、inacorporationarereferredtoasstock.However,ifourownerdidnothavenecessaryfundstostarttheirownbusinesstheycouldfinancetheiroperationinoneoftwoways:1.Issuestock(orcertificatesofpartialownershipinhiscompany)topeoplewhomaybeinterestedinhelpingtheirventureoutinreturnforaprop

6、ortionalshareoftheprofitsthatthecompanymightgenerate.2.Borrowmoneythatwillneedtobepaidbackwithinterest.So,whataretheadvantagesofsellingstock?TopWhyDoCorporationsIssueStock?Businessesissuestocktoraisecapital.Advantagesofissuingstock:1.ACompanycanraisemorecapitalthanitco

7、uldborrow.2.ACompanydoesnothavetomakeperiodicinterestpaymentstocreditors.3.ACompanydoesnothavetomakeprincipalpayments.DisadvantagesofIssuingStock:1.Theprincipalownershavetosharetheirownershipwithothershareholders.2.Shareholdershaveavoiceinpoliciesthataffectthecompanyop

8、erations.TopAdvantagesforStockholdersAspartownerofacorporation,youmaybeentitledtoshareintheprofitsofthecompany.Therei