Basic knowledge about Stock Market

                     What is Share/Stock market ?

Share or stock market is the place where public buys the small portion of the company to become owner of that company.

The question is that What does public buys ?

The public buys small piece of the company which is called as Shares. Now we will understand “what is Share?”

Share is the small units of company that shows Shareholder’s ownership to take part in company’s performance. 

Let’s take an example and understand why companies sell its Shares to public or any organization.

A CEO has a company named as “Gautam Multi Tech” which current market value is Rs.10 lakhs. CEO wants to launch new project or expand his business that’s cost about 8 lakhs but he only have 5 lakhs on his company’s account so he wants to raise 3 lakhs fund from public & Launch it’s IPO to the general public. That means company’s 30% shares are in selling .because company’s total valuation is 10 lakhs and 30% of 10 lakhs is 3 lakhs .

The calculation goes as :

 3000 kitta (Unit) of share  x 100 Rs per unit = Rs. 300000 Total cash  ( Collected )

Company offers it’s 3000 units of share at the amount of Rs.100 per unit to collect Rs. 300000 cash

What is 1 kitta (Unit) share ?

The smallest portion or part of the share to trade is known as 1Kitta (Unit) share. Generally 10 unit is mostly traded portion on IPO transaction.

Some general assumption of why company sell its share are  :

·      To collect fund

·      To pay loans

·      To Invest the collected money

·      To attract intelligent investor for taking over and running the company

·      To get the prestige that comes with public company

·      To reduce the risk of owner

People buys the share at cheap price and hold it for some time the sell it on higher price to earn profit. The person who does this action repeatedly in a professional way is known as TRADER.  

 

“Becoming financially freedom with Chetan G.”.