Basic Concepts Related To the Stock Exchange

Basic Concepts Related To the Stock Exchange

There is a lot of talk about the stock market, especially since you can make a lot of money on it. Of course, you can also lose a lot, but much less is said about it. During various conversations on the subject of the Stock Exchange, professionals use a specific language and terms that are not fully understood by everyone. Below, in a clear and clear way, we will try to describe the basic concepts related to the Stock Exchange, so that a little more people know what they mean.

Action – is a kind of security. Everyone who owns shares in a joint-stock company becomes a co-owner of its assets. With shares, we can influence its management, and we have the right to part of the company’s profit. The vast majority of stock market players, however, buy shares to earn them, not to influence the company’s development. They try to buy shares of a given company when they are cheap, to sell them when their value increases.

Bessa – time on the Stock Exchange, when the value of the majority of shares falls. We often hear that there is a downward trend or “bear market” on the stock exchange. Shares at this time are rather sold and thus their value decreases.

Brokerage office – it is an institution that keeps investors’ accounts and provides comprehensive services (accepts orders, settles transactions).

Blue chips – as blue chips are defined companies that have the largest capitalization and have the highest turnover on the Stock Exchange. They are usually included in the basic stock indices.

Issue price – the price of a given company’s shares, which is valid on the primary market.

Dividend – part of the company’s profit that is spent on shareholders’ payments. Its amount is determined by the general meeting of shareholders of a given company, which is a wonder about what to do with the generated profit. In Western Europe and the USA, the dividend is very often paid out by companies present on the Stock Exchange. Only a small part of our country shares its profits with its shareholders. Fortunately, this is slowly changing and we hear more and more that companies pay dividends

Hoss – time on the Stock Exchange, when the value of the majority of shares increases. It is said that then, that the stock market has an upward trend or “bull market”. Shares at this time are willingly bought, and thus their value increases.

Index – an indicator whose value depends on the prices of all or selected listed companies. Indexes are created to better analyze the situation on the stock market, both comprehensively and in individual “groups”. We have several indexes on the Warsaw Stock Exchange. They are:

  • WIG 20 – it includes 20 largest companies that are listed on the Stock Exchange.
  • mWIG40 – it includes 40 medium-sized companies, which are listed in the continuous trading system
  • WIG – an index in which all companies present on the Warsaw Stock Exchange are listed,
  • TechWIG – an index to which we include companies from the ICT sector (their size does not matter)

 

Capitalization – this is the value of all shares of a given company, according to the last exchange rate.

The prospectus – this is a document that every company must prepare to “enter” the Stock Exchange. It must contain detailed information on the company’s financial and legal situation, investment plans, etc. The prospectus must be prepared also when the company already present on the Exchange wants to issue new shares.

Spread – this is the difference between the order with the highest share price of a given company and the order with the lowest price.


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