Stock Market
The stock market has two very important goals. The first is to provide capital to businesses that they can use to finance and grow their businesses.
If a company issues one million shares that it initially sells for Rs 10 per share, this provides the company with Rs 10 million of capital that it can use to expand its business by offering shares instead of borrowing. the capital necessary for the expansion of the business. , the company avoids borrowing and paying interest on this debt.
The secondary purpose of the stock market is to give investors – those who buy stocks – the opportunity to share the profits of listed companies. Investors can benefit from buying stocks in two ways. Some stocks pay regular dividends The other way that investors can profit from buying stocks is to sell their stock for a profit if the stock price rises relative to the purchase price.
Analysing Stocks
The stock market has two very important goals. The first is to provide capital to businesses that they can use to finance and grow their businesses. If a company issues one million shares that it initially sells for Rs 10 per share, this provides the company with Rs 10 million of capital that it can use to expand its business by offering shares instead of borrowing capital it needs to grow, the business avoids going into debt and paying interest on that debt.
The secondary purpose of the stock market is to give investors – those who buy stocks – the opportunity to share the profits of listed companies. Investors can benefit from buying stocks in two ways. Some stocks pay regular dividends The other way investors can profit from buying stocks is to sell their stocks for a profit if the stock price exceeds the purchase price
Stock Analysis
Stock analysts and investors can look at a variety of factors to indicate the likely future direction of a stock, up or down. Here’s a look at some of the most commonly viewed variables for inventory analysis.
A security’s market capitalization, or market capitalization, is the total value of all the outstanding shares of the security. A higher market capitalization generally indicates a stronger and more financially sound business listed companies are required by foreign exchange regulators to provide regular reports on their profits.
These reports, published quarterly and annually, are closely watched by market analysts as a good indicator of a company’s business performance. Among the key factors analyzed by earnings ratios is the company’s earnings per share which reflect the company’s earnings spread over all outstanding shares.
Analysts and investors also frequently review a variety of financial reports intended to indicate the financial stability, profitability, and growth potential of a listed company. Below are some of the main financial ratios considered by investors and analysts:
This is a fundamental metric of a company’s financial stability, as it shows what percentage of a company’s operations are being funded by debt compared to what percentage are being funded by equity investors. A lower debt to equity ratio, indicating primary funding from investors, is preferable.
There are several profit margin ratios that investors may consider, including operating profit margin and net profit margin. The advantage of looking at profit margin instead of just an absolute dollar profit figure is that it shows what a company’s percentage profitability.
Two basic approaches in investing
There are countless methods of stock picking that analysts and investors employ, but virtually all of them are one form or another of the two basic stock buying strategies of value investing or growth investing.
Value investors typically invest in well-established companies that have shown steady profitability over a long period and may offer regular dividend income.
Value investing is more focused on avoiding risk than growth investing is, although value investors do seek to buy stocks when they consider the stock price to be an undervalued bargain.
growth investors seek out companies with exceptionally high growth potential, hoping to realize maximum appreciation in share price.
They are usually less concerned with dividend income and are more willing to risk investing in relatively young companies. Technology stocks, because of their high growth potential, are often favoured by growth investors.
