What Is The Principle Of The Work Of Stocks Exchanges ?

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What Is The Principle Of The Work Of  Stocks Exchanges?

A stocks Exchanges or a right of ownership; it is a type of security that refers to a specific ownership or share of a company, and gives its holder a percentage of the company’s assets and profits, and the shareholder is any person, company or corporation that owns at least one share in the company.

What is the reason for the existence of stocks Exchanges ?

Companies in general seek to raise and increase funds in order to run all of their business, so they resort to issuing shares and selling them in order to raise capital higher than the owners of investments, and companies can issue new shares whenever the need arises to raise additional funds (to pay off some debts, or to launch and market New products, or expanding into specific markets and regions).

The percentage of shares a person possesses represents his ownership in the company in proportion to his share of the shares; that is, ownership is determined by the number of shares the person owns in relation to the total number of shares, for example, if a company has 2,500 shares, and one of the investors purchases 250 shares, he now owns 10% of the company’s shares and profits.

The investor stocks Exchanges who owns the majority of the shares, the voting power of the company increases, and thus he can indirectly control the management of the company by participating in the appointment of its board of directors.

There are many ways to buy or sell stocks Exchanges , either through stock exchanges or through private sales, and until any investor protects himself from fraud or fraud, all transactions must be in accordance with government regulations.

What Is The Principle Of The Work Of Stocks Exchanges ?
What Is The Principle Of The Work Of Stocks Exchanges ?

Types of shares

In general, there are two main types of shares, which are common (common) and preferred.

The common stocks Exchanges has the right to vote when making a decision in the company. As for the  preferred shares,  the owner does not have the right to vote, but he has the legal right to obtain a certain level of profits before issuing any other profits to other shareholders,


and he has priority in the event of bankruptcy or liquidation of the company, and also Preferred shares involve a type of them called convertible; that is, the owner of the shares can at any time wish to convert his preferred shares to a specified number of ordinary shares, after a predetermined time from his purchase of shares.


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Stocks Exchanges Separation of ownership and control

The ownership of companies is legally separated from the ownership of shareholders in order to preserve and clarify the responsibility of each of them, for example if a company goes bankrupt, and even in light of the great value of the shares, no one can compel any investor to sell his shares, and likewise in the event that one of the main shareholders fails.

The assets of the company can be sold to pay off the debt, meaning that the company owns the assets, and the investors are the ones who own the shares issued by the company. If an investor owns 33% of the company’s shares, this does not mean that he owns a third of the company but rather 100% of a third of the company’s shares,

Here is the most important point in the principle of the work of shares and m Ownership concerns, that is, investors cannot act as they like in the company’s assets, and this is known as “separation of ownership and control.”


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