Introduction
A share is a unit of ownership that is normally used by public companies as a means to generate capital. A debenture on the other hand is a document that either creates or acknowledges a debt. A company that has its shares in the market would opt to introduce debentures as a way of carrying out social investing. Shareholders are therefore owners of the company. They own a section of the company because money that they used to purchase the shares was directly invested in the company as a means of production. Trading in shares by listing them in security market is a way that companies ensure that they constantly get capital on a regenerative basis. Trading in shares is regenerative in that once a company is listed in the stock market and made an entrance through an IPO-initial public offer, the shares would stay in the market circulating for as long as the investors would deem necessary. The buying price is normally lower than the selling price (Donaldson 2007). The variation in the two prices results into profit for the firm whose shares are in concern.
Main body
On any day, the price of the share would be as follows: selling price- US$ 16.45 Buying price- 14.4.
This implies that the market buys the shares from the holders at US$ 14.4 and sells the same to interested shareholders at US$ 16.4. The difference of US$2 is the one that tells the strength of the company and is indicated by a gain or loses. It is also the capital generated from the transactions that the company gains from. Therefore, with such a profit margin and the company trades two million shares, then it shall have generated a profit of four million US dollars. This is an amount that the company makes without involving any means of productions thereby making it very lucrative. However, for a company to be listed in the stock market it has to meet certain conditions.
Firstly, a company would be listed when it is at the brink of liquidity and therefore needs the money to find its footing back in business. It must however convince the market that an investment in its shares would not result to a loss for investors. The government has a responsibility of protecting its citizens from incurring unnecessary loses through the above regulations (Barry & Jamie 2008).
Such lucrative undertakings however come with risks for both buyers of the shares and the company. The shares can be introduced through an initial public offer with an exorbitant price with the hopes that the firm would maintain the market position it currently holds but then after introduction the trends change and the shares are not favored this would result into total loss for all those who took part in the IPO, the company would not raise the intended capital while the public would never sell back the shares at a profit either (Barlett & Ghoshal1992). Some of the trends that would lead into such a drop in the price of a share include the appreciation of a local currency. When a currency gains value against the international currencies such as the American dollar or the euro, most products in that country drop their prizes, one of the commodities that would do the same is the shares listed in the securities market. Another situation is when another company operating in a similar trade gets listed in the same security market. This would see the demand for the shares divided between the two companies therefore translating into loses for the previous firm (Kawakatsu & Morey 1999).
Some sectors are also not worth investing in especially when there are pending issues. A company that is a player in the extraction sector can be listed in stock exchange market. However, some uncertainties especially when there is no clear information on when oil and gas will be depleted can be a hindrance to the listing. If something happens so that the minerals get depleted, then the company goes bankrupt.
Conclusion
Conclusively, the amount of risk in the trade can never correspond to the return and should the risks take place, the losses would be enormous (Richard 2003). The phenomenon in Hong Kong would be hard to describe as the market is heavily influenced by level of political stability in the region. Stakeholders in the stock market anticipate a longer period to come from the weak economy and the fact that people do not invest in stock market in that country is also a factor worth considering (Jeffery 2001).
Reference List
Barlett, C & Ghoshal, S 1992, Importance Of Business Management, Harvard Business Review. Vol.70 no.5, pp.124-13.
Barry E, & Jamie E, 2008, Financial Accounting and Reporting, Oxford University Press, Oxford.
Donaldson, S 2007, Income taxation of individuals: cases, problems and materials, St. Paul University Press, Thomson West.
Hsieh, J & Nieh, C 2010, An Overview of Asian Equity Markets, Asian-Pacific Economic Literature, vol.24 no. 2, pp. 19-51.
Jeffery, F 2001, Introduction to Business Law, Boston University Press, Boston.
Julian, B 2007, Why is knowledge management is so hard? Cambridge University Press, Cambridge.
Kawakatsu, H & Morey, M 1999, financial liberalization and stock market efficiency: an empirical examination of nine emerging market countries. Journal of Multinational Financial Management, vol. 9 no.3, pp. 353–371.
Kuntara P& Nuttawat, V 2009, Commonality in liquidity: Evidence from the Stock Exchange of Thailand, Pacific-Basin Finance Journal, vol. 17 no.1, pp. 80-99.
Richard, B 2003, Vocational business training, developing and motivating people, McGraw-Hill, New york.
Thomas, D & Michael, C 2001, Successful Management Projects, OUP Publishers, Oxford.
YAHOO! Finance. www.yahoonews.finance: 2012.