(Second Industrial Period) - What is stock and why do corporations sell stock?This was the time during the Second Industrial Period.

Stocks, also called shares, represent the right of ownership in a joint stock company.  The joint stock companies are a form of business organization in which the ownership of the company is separated from the function of managing and conducting the business. The company is owned by people who buy shares or stocks issued by the company representing part ownership in the company. In this way the ownership of the company is divided in large number of shares. The number of shares issued by a big company may can run into millions for big companies. For smaller companies these may be as low as a few thousand shares.

The people buying the shares of a company become part owners of the company in proportion of the stocks held by them, and have a right to share the profits of the company in the same proportion. The stockholders do not directly manage the company. They appoint directors to manage the company. The they also take some major decision about management of the company. The right of shareholders in deciding in these matters is also proportional to their shareholding. These decisions are taken by the shareholders based on majority. These decisions are taken in periodic meeting of the shareholders of a company. In normal circumstances such meetings are held once a year.

The shares held by a person or a company can be traded on stock markets at ruling market price. In this way the ownership of the company represented by the stocks also gets transferred with sale and purchase of stocks. The price of the stocks is determined by the current and expected performance of the company as well as by the interplay of demand and supply of their stocks in the market.

Companies or corporation issue or sell stocks to obtain finances for running a business. In this way the investors and shareholders can invest money in a business without need to be involved in the day to day management of the business. Also their liability for loss is limited to the money invested by them in form of shares. Facility of selling and buying shares on the stock market gives the shareholders greater liquidity of their funds invested. Because of all these advantages the corporations can attract a large number of investors to invest in the company, enabling them to obtain large sums of money for major business ventures.