The stock market

XML is used in may business areas, in particular in finance. So here is a brief synopsis about the stock market where XML is almost used in every online and offline transaction.

The stock market: a brief definition

The stock market has been familiar to investors in developed countries throughout the past century and into the present. On the children’s PBS show Biz Kid$, designed to teach basic financial concepts to young people, capital stock is defined as “a small part of something big.” Put more specifically, people who buy stock in a corporation are buying a share of ownership in that business.

Ownership in a corporation, it must be noted, is different than it is in a proprietorship or a partnership in that it is open to anyone who is willing to purchase stocks thereof. The “Capital Stock” account in the books of a corporation thus corresponds to the “So-and-So, Capital” accounts in those of businesses of the other two types.

A brief historical background

Stock exchanges as we know them today began in the 1500s. The rediscovery of the Americas resulted in trade ventures on a scale heretofore unseen, and such ventures required more money than any one person could provide. Merchants therefore began to pool their resources and formed the first stock exchange in Antwerp, Belgium in 1531.

Capital vs. preferred stock

There are two main kinds of capital stock – common and preferred. Each unit of common stock represents a vote in the corporation. Preferred stock has no vote but gets preference over common stock with regard to certain rights such as dividends, liquid proceeds or occasionally special voting rights. They are more commonly sold by private corporations, where the distinction between a company’s control and its financial interests is easier to make.

Factors that affect the prices of stocks

In essence, the stock market is a corporate ownership “auction.” As in every market, the law of supply and demand plays a big role in determining share prices – they will be higher when more people want to buy and lower when more people want to sell.

When talking about the stock market, economists speak of the “par value” of a share. This is its stated or “face value” and it is entirely unrelated to its market value. If shares are sold above or below par value, it is so recorded in the books via the account “Paid-in Capital in Excess of (or Below) Par Value.”

One thing that every long-term investor must know is that the price and the worth of a given stock are not the same. The price is simply the point at which the buyer and the seller agree, whereas worth is what an investor is willing to pay today for any profits that could be gained in the future through growth, income and dividends.

It is commonly said that an investor should not care about the price of stock except on the days when he or she buys and sells. However, this saying really applies only in certain conditions, for instance if you will not need to sell for more than five years or if there are sharp “swings” in the prices.

For the coming year

It is predicted by both Standard & Poor and Wells Fargo that the stock market will grow in 2014. Equity returns, however, are unlikely to be as strong as they were this past year.