Stock Market Tips: Differentiation Of A Stock From A Non Stock Corporation. A stock is a certificate of partial ownership from a company in which is regulated by the Securities and Exchange Commission by the finance bureau of the United States government. Stocks are available in corporations that are engaging in profitable activities such as selling goods and services in the country’s market.
There are two kinds of stocks and these are the common stock and the preferred stock. Any individual can purchase a stock from a corporation regarding the amount of stocks or shares. The more stocks a shareholder possesses, the more percentage of ownership the individual attains from the corporation thus making them a major corporate shareholder.
A bond on the other hand is a certificate of indebtedness from a financial institution. An example of a financial institution that issues bonds is banks and financing intermediaries. The presence of a middle man or an intermediary plays a large role in the lender and borrower relationship. The role of a middleman is to guarantee the lender that the borrower will be able to pay the amount being borrowed in which collateral is needed before a borrower can make a loan from a financial institution in a capital market.
Engaging in stock broking requires the good skills of forecasting the possible value of a share. Stock brokers should be good on predicting the future value of the share that they purchased since investing in stock broking is very risky. Determining the future outcome of the financial market is not very easy thus a stock broker’s chance of earning profit is equal with the percentage of losing the investment.
Two kinds of corporations:
Stock corporations are corporations that issues stocks in which anyone can purchase and sell in a stock market or back to the corporation as well. These corporations are companies that are selling products and services for profit and other financial purposes. There are a lot of different kinds of stock corporations. Multi-national companies are a good example of these financial institutions.
Schools on the other hand may fall under this category as long as their goal is income generation. It is the duty of the board of directors of a certain company or a corporation if they would prefer to issue stocks and shares to the market or rather stay as a nonprofit organization.
Non stock corporations are business institutions that engage in business and aims for profit however uses the businesses income for investing in other activities such as charities and building social establishments such as schools and other multi-purpose buildings. These kinds of corporation do not issue stocks or shares since they are a nonprofit organization or institution.
The profit gained is rather invested in another business or donated in charitable institutions for the better welfare of the society. A stock corporation has certain exemptions from the government such as lesser tax rates from its revenues since majority of the corporation’s income goes to social institutions.