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Stock Market Basics

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Questions and Answers

What is the primary reason companies sell shares through IPOs?

To decrease the market demand for shares

To lower the value of existing shares

To raise capital for growth and expansion (correct)

To increase the number of shareholders

What is the main purpose of a stock split?

To decrease the number of available shares

To increase the value per share

To make shares more affordable to investors (correct)

To stabilize daily fluctuations in stock prices

How do stock values generally respond to company growth?

Depend on the company image

Decrease in value

Stay stagnant

Increase in value (correct)

Which factor can influence stock prices based on the information provided?

Quality of the company image Signup and view all the answers

What role do stock exchanges like NYSE and Nasdaq play in the global stock market?

They facilitate trading of securities globally Signup and view all the answers

What distinguishes common stocks from preferred stocks?

Common stocks have voting rights while preferred stocks receive preferences in dividends. Signup and view all the answers

How can an individual invest in the stock market?

By opening a trading account with providers like Etrade or Robinhood. Signup and view all the answers

What determines the price fluctuations of stocks in the market?

Supply and demand dynamics. Signup and view all the answers

Why do companies sell stocks through initial public offerings (IPOs)?

To raise operating capital. Signup and view all the answers

What is one advantage of investing in the stock market over keeping money in a bank account?

Potential for higher returns. Signup and view all the answers

Why is research considered essential before investing in stocks?

To make informed decisions about which stocks to purchase. Signup and view all the answers

Study Notes

Stock market is a global network where securities are traded, representing ownership in companies.
Companies sell shares through IPOs to raise capital for growth and expansion.
Stock exchanges like NYSE, Nasdaq, TSX, NSE, and JPX facilitate trading globally.
Share values reflect company performance; growth increases share value.
Stock splits occur when share prices become too high, making shares more affordable.
Example: Apple had multiple stock splits, increasing number of shares while lowering individual share price.
Stock prices can be influenced by factors like company image, supply and demand, leading to daily fluctuations.

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Description

Explore the fundamentals of the stock market, including how companies raise capital, the role of stock exchanges, factors influencing stock prices, and the impact of stock splits on share values.