In detail, how does the stock market work?

Question

I want to know how the shares of a company increase and decrease, what buying shares of a company does for the company, how the price of a share is determined, what a blue chip is and how a company becomes that, where my money goes after i buy a stock, what to look for to determine if the price of a stock is rising, and any other important information i should know.

FYI i ask questions about things i know nothing about all the time so that i have direction on where and what to look up on more credible sources.

Answer 1

share of a compny is the value perceived by the market of that company.

There are two types of company shares - common stock, preferred stock. Buying a common stock of the company makes you one of the owners of the company. Buying a preferred stock makes you just an investor (not owner).

Value of the share varies based on the company performance and market demand. If the demand is high, the the price will be high as supply is limited.

Blue chip company is the one whose shares are in high demand and a company gets that adjective if they have been performing excellent, making profit and continuously returning good dividend to the common stock holders.

After you buy stock, the money goes to the company's current asset so that it can be used for operation.

Look at the share prices of the comapany, share indices, the industry it operates and look at the company's income statement. If the income statement shows that the company has continuously increase in revenue and it is performing in a growing industry environment, there is high chance that the company will have rising stock price.

You better follow financial journal section of the newspaper, follow the business trend and I am sure you will be abel to become a good judge on the company shares around.

Answer 2

When a company starts and needs money, it sells shares in that company to raise money. The people who buy those shares then own the company and vote for the board of directors who vote in the CEO and make other key decisions for the company. The price is determined by what people want to pay for it. Learn about book value , price/earnings ratio, things like that. Get books. Keep in mind that sometimes the people in charge pay themselves huge salaries and dump their own stock, then the company goes bankrupt like Enron or Worldcom. Value Line (at libraries) will give you detailed info on a company and even tells you if the inside people are buying or selling. Blue chips are the large companies, less risky, but safer investments usually. Try the motleyfool website to learn more.

Answer 3

By the sale rate(share growth), helps the company grow to produce more materials and partly owning some of it(buying), to the company to help it thrive(stock), the percentage(determine), and if it leads, it can mean good business. That's what I know.

Answer 4

Another novice that think they know what questions are relevant.

Amazing.

The idea here, is for you to do the work, not us. You should try to learn something first, looking up everything you can, then when you have trouble finding something or understanding something, we can help you. But we can't help those that won't help themselves. If you aren't willing to do the work, neither are we.

But you sit back and just ask questions, expecting the whole world to come kneeling at your feet to give you the answers.

Incredible.

Go back to the kiddie section and play out your fantasies there.

Answer 5

I suggest you to open a brokerage account at Scottrade and visit the Help section daily.

Top 3 Answerer in Business & Finance. (Vote for me)

Answer 6

Seriously, to properly answer your question would require reading at least 10 books. So... instead of typing it all out, just go read all about it on Wikipedia!

http://en.wikipedia.org/wiki/Stock_market

Answer 7

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