Which Of The Following Statements About Stocks Is True?
Are you also angry and done by looking all over the internet and finding nothing? So, if you want to know which of the following statements about stocks is true, stay with us till the end.
Well, you are not the only one. A lot of people are in the same position. And we feel so done with the fact these questions never have a proper answer.
Every time I open Google and look for “Which of the following statements about stocks is true?” I get no help. Google just redirects me to a page where I must subscribe to get the answer.
Also, I never really get the reason behind the answers they give. It is only the correct option. That is really problematic when you genuinely want to know the answer, and Google has none.
Therefore, to solve your problem, I will dedicate this article to answer the question you have asked above. And will also explain the reasons behind the same.
Which Of The Following Statements About Stocks Is True?
A. Stocks specify the benefit that the holder will have in the future
B. The act of buying stock of a corporation amounts to buying a part of that corporation
C. Stocks have maturity dates
D. Stocks pay interest to the stockholder
These are the options related to the accountability of stocks. And the correct option here is Option B. “The act of buying stock of a corporation amounts to buying a part of that corporation.”
However, was that just enough? Was that the only thing you were looking for? I sure hope not. No one is on Google looking for only the correct option. We all want explanations that could justify the answer that we have chosen.
It is disappointing because all I could ever find was the correct answer and not one definition that could help me reason with my answer. Therefore, I just decided to create an article of my own that will serve people who think like me.
So, without any more delay, here we go.
Read More: What Are Stock ETFs? How To Invest In 2023?
The Act Of Buying Stock Of A Corporation Amounts To Buying A Part Of That Corporation
A stock, or an Equity, is a security that renders the ownership of a portion of the issuing corporation. Each of the units of the stocks is a share, which entitles the owner to a proportion of the assets of the corporation, and the profit equals the amount of stock that an individual owns.
Stocks are predominantly purchased and sold on the stock exchange and are the ultimate foundation of multiple individual portfolios of investors. Stock trades must conform to the regulations by the government to protect the investors from any such fraudulent activities.
What Is Known As Shareholder Ownership?
What the shareholders own are the shares that the corporation issues and the corporation holds those assets that a firm holds. If an individual owns 33% of the shares of a firm, they cannot claim that they own one-third of the company.
In that case, they may only claim that they own one-third of the shares of the company. This is popular as the “separation of ownership and control.”
Owning stocks gives the shareholder the right to place a vote in a shareholder meeting, receive the dividends if and when the company distributes them, and get the right to sell the shares to anyone else of their choice.
In case an individual owns the majority of the shares in a company, it, in turn, increases their voting power so that they may indirectly control the direction in which a company is heading by appointing the board of directors. This becomes even more apparent when one company purchases another. The acquiring corporation buys out all the outstanding shares.
It is the responsibility of the board of directors to increase the value of the company, and usually does so by hiring professional officers or managers, like the CEO or Chief Executive Officer. Only shareholders will usually not be managing the company.
Being a shareholder has an importance of its own. You are granted a section of the profit of the company, which is the fundamental element of the value of the stock.
The more shares a shareholder owns, the larger will be the portion of profits that they will receive.
However, there are quite a few organizations that do not pay dividends to their shareholders. Instead, they reinvest the profit towards the growth of the company. However, these retained profits are well reflected in the value of the stocks of the company.
How To Buy A Stock?
In most cases, anyone can buy and sell stocks at a stock exchange like the New York Stock Exchange (NYSE) or the Nasdaq. A company will first have to go public through the initial public offering, which is more popularly known as the IPO.
IPO is the stage where stocks of a company are available for buying and selling purposes for investors.
Generally, investors will have to use a brokerage account to be able to purchase a stock in the exchange. The listed purchasing price is known as the bid, and the selling price is known as the offer.
The price fluctuation of the stocks is manipulated by the demand and supply factors within the market, among other variables.
Can Stocks Give Guaranteed Returns?
This is uncertain and, in most cases, not true. Investing in stocks will not always guarantee you a return. The stock market goes through terrible fluctuations, and the prices of the stocks may rise or fall.
These fluctuations are driven by multiple factors, which include the performance of the company, the market conditions, and the economic trends.
While it is true that stocks can give you high returns, it is also true that they come with major risks. Therefore, expecting a guaranteed return is not a very clever thing to do.
Read More: What Is Power Hour Stocks? How To Utilise It?
The Bottom Line
I am hoping that I have answered your question, “Which of the following statements about stocks is true?” along with all the necessary explanations that you have been looking for.
Buying stocks of a company is a wise thing to do, only if you are ready to face all the risks that come with it. Investing is not child’s play. You need to understand the entire process, learn to read the market conditions, and then invest.
Making wrong and impulsive decisions when it comes to stocks can result in severe financial damages that can take forever to fix.
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