The stock market is basically a market for the trading of company stock and derivatives of same. The expression of stock market refers to the system that enables the trading of company stock and it is a one of the most important sources for the company to raise a money.
A stock exchange, bourse and share market is a mutual organization and corporation which provides the different type of facility for the traders to trade the company stocks or other securities. It also provides the facilities for the fulfillment of securities issue as well as the other capital events or financial instruments which includes the payment of income. In the stock exchange, the securities are traded to include the unit trust, the shares which are issued by different companies and other pooled investment on products or bonds.
It also provides the multiple roles in the economy such as facilitating company growth, corporate governance, raising capital for businesses, mobilizing savings for investment. All of these roles are discussed below:
Facilitating company growth
Companies generally view on the acquisitions as an opportunity to expand the product lines, increase its market share, and increase the distribution channels or other necessary business assets.
Raising capital for business
The stock exchange is generally provided for the companies with the facility to raise the capital for expansion through the selling shares to the investing public.
Mobilizing savings for investment
When people invest their money in shares, or draw their savings, then it leads to a more rational allocation of resources because the funds which could have been consumed or kept in bank are mobilizing and redirected to promote the business activity.
Barometer of the economy
In the stock exchange, the share prices are large and fall but it is overall depending on the largely market force. A financial crisis, economic recession could eventually leaded to a stock market crash.