Concepts of stock exchange

What is stock exchange?

This is the market where already issued securities like shares, bonds, stocks can be bought and sold. For example, DSE, KSE, USE, in Dar es Salaam stock exchange, Kenya stock exchange and Uganda stock exchange.

Functions of stock exchange

1. It provides a ready market for those who wants to buy and sale their securities.
2. It is part of saving by members of the public.
3. It facilitates the raising of capital for investment.
4. It is used to judge country's economy progress.
5. It is important means of raising up government revenue through tax.
6. It provides employment opportunities.
7. It publishes useful information, statistics and summary of various companies.

Important terminologies used in stock exchange

1. Par value. This is a face or nominal value of a security as it is written on its face (cost price).
2. Market value. Refers to the current price of a security as it is sold in the market as per demand.
3. Cum. Div (including dividends). This word stands for "with Dividends" which implies that the price quoted in a security will include some amount of outstanding interest for the previous period when an investor/seller declares dividend for the first time.
4. Ex-Div (excluding Dividends). This term stands for "without dividends) which implies that the price quoted will include some amount of dividend to be paid in advance when an investor declares it for the first time.
5. Quoted company. Is a company which allows its shares to be traded in the stock exchange market. That is bought and sold will only apply to public ltd company e.g. CRDB, Precision airways etc.
6. Un quoted company. Is a company whose shares are not traded in the stock exchange. That is, all private companies and some public companies which may decide not to sell their shares at stock exchange market will be in this category. For example, Bakhressa, Mengi, Manji etc.
7. To go public. This is an act of converting (changing) a private limited coy into public company. This will happen when a private company wants its shares to be trades at the stock exchange market.
8. Staging. It is a speculation which occurs in the new issue of shares in the stock exchange