(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.