Business Organizations and Stock Markets

Business is organized approach to providing customers with the goods and services they want. The word business also refers to organizations that provide these goods and services – companies, firms (usually small companies), corporations (usually in the USA, in Britain it is a large company). Business plays a vital role in the life and culture of countries with industrial and postindustrial free-market economies. Most businesses are organized to make a profit - they aim to achieve revenues that exceed the costs of operating the business.

There has been a long tradition of directing business and the economy through financial institutions – banks, insurance companies and Stock Exchanges (Stock Markets). The stock market is one of the most important sources for companies to raise money. This allows businesses to raise additional financial capital for expansion by selling shares of ownership of the company in a public market. The liquidity provided by any stock exchange affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption..

Companies, usually large and successful, whose stocks and shares are officially available on a stock market, are known by the name of listed/quoted companies. Prices of shares on a stock market are given in the form of stock quotations. Many newspapers have a financial section which includes information about the share prices of listed companies. This information is given in the form of Stock Tables and enables you to follow the progress of any shares that you own or may be thinking of buying. The Stock Table may look like this:

Columns 1 & 2: 52-Week High and Low. These are the highest and lowest prices at which a stock has traded over the past 52 weeks (1 year). This typically does not include the previous day's trading.

Column 3: Company Name and Type of Stock. This column lists the name of the company. If there are no special symbols or letters following the name, it is common stock. Different symbols imply different classes of shares. For example, "pf" means the shares are

preferred stock.

Column 4: Dividend Per Share. This indicates the dividend payment per share. Dividend per share is the dividend paid in the most recent quarter which is then used to calculate the dividend yield. If this space is blank, the company does not currently pay out dividends.

Column 5: Dividend Yield. The yield shows how much shareholders can expect to receive as a dividend. Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price.

Column 6: Trading Volume. This figure shows the total number of shares traded for the day, listed in hundreds.

Column 7 & 8: Day High and Low. This indicates the price range in which the stock has traded throughout the day. In other words, these are the maximum and the minimum prices that people have

paid for the stock.

Column 9: Close. The close is the last trading price recorded when the market closed on the day. If the closing price is more than 5 % above or below the previous day's close, the entire listing for that stock is bold-faced. Keep in mind, you are not guaranteed to get this price if you buy the stock the next day because the price is constantly changing, even after the Exchange is closed for the day. The close is merely an indicator of past performance and, except in extreme circumstances, it serves as a ball-park of what you should

expect to pay.

Column 10: Net Change. This is the dollar value change in the stock price from the previous day's closing price. In other words, It is the difference between the close of a share on one trading day and that of the previous day. When you hear about a stock being "up for the day," it means the net change was positive.

On TV stock quotations are usually presented in a simplifiedform (for example, the BBC 2 programme Working Lunch – Shaw’s Shares):

Every major stock market around the world has at least one index which is used to represent the stock market as a whole. For example, the Dow Jones Industrial Average (DJIA) is the most important U.S. stock market performance indicator. A report in the U.S. media that the market has gone up 40 points or down 10 points, for example, actually refers to the movements of the Dow. The stocks of these 30 companies represent close to 20% of the market value of all the stocks listed on the New York Stock Exchange. The index, therefore, is essentially a measure of the performance of the stocks of large corporations.

The calculated averages of indexes are published in the leading financial newspapers, such as the Wall Street Journal,the Financial Times. On TV they appear in a simplified form: