Companies, Shares, and Stock Markets

We have been talking about the financials of a company and how we can analyse their statements. Now let us try and use our knowledge to earn some moolah by investing in shares of a company in the stock market:)

A little background first. Public companies raise money for their operations by issuing shares to the general public. These shares are transferable, meaning, the original shareholder can sell her shares to anybody else who wants to own it. The market where the original and subsequent shareholders sell and buy shares of companies is called the Secondary Market. The stock markets, like BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), are examples of the secondary market.

If you take a look at a stock quote in the newspaper or the Internet, you will see something like this:

Company Name : a b b ltd.
		Open	Intra Day		52 Week	Prv Close	Volume
NSE	1647.75 108.00	1600.00	High	1662.00	4841.00	1539.75	272977.00
			Low	1585.05	950.05
		Open	Intra Day		52 Week	Prv Close	Volume
BSE	1643.65 95.65	1607.00	High	1659.00	4845.00	1548.00	60095.00
			Low	1590.00	955.00

The information is quite self explanatory. You see the name of the company followed by information about how the stock fared in the stock exchange on that particular day( or till that point in time in case of a live quote):

• The first column provides the current price of the stock on both the exchanges. This is the price that you will have to pay to buy one share of the company on that day.
• The information in green signifies an increase in price over the previous day. Any decrease would be displayed in red.
• The column titled Open displays the price quoted at the beginning of the day.
• The next column displays the lowest price and highest price quoted for the stock during the day.
• The highest and lowest prices quoted for the stock in the last 52 weeks is displayed next.
• The next column has information about the closing price of the stock on the previous day.
• The last column displays the number of shares of the company traded during the day's session.

More on stocks and prices later...