A stock is a security guaranteeing its owner (stockholder) the right to have a share in assets of a joint stock company, in its management and profit, and if the company is dissolved, to have a share in the liquidation balance. A stockholder is entitled to a share in the profit of the joint stock company in the form of a dividend.
The amount of the dividend is decided on by the General Meeting, formed by stockholders (depending on the achieved profit). The dividend amount is variable, which makes a stock different from investments with fixed yield (a term deposit, building saving, bond, mortgage-backed bond).
The stockholder will only become entitled to a dividend if s/he holds the stock on the so-called decisive day. The decisive day is determined by the General Meeting. Thus a stockholder may hold a stock for one day in a year only to become entitled to a dividend. On the contrary, if a stockholder holds a stock for 11 months, but sells it before the decisive day, the stockholder shall not be entitled to a dividend.
Two yield types may be achieved in stock trading:
Capital yield - the selling price cena is higher than the purchase price
Dividend yield - a share in profit resulting from holding a stock of a company
Every stock is allocated its own ISIN (International Securities Identification Number) pursuant to which it is identified.
Stocks are mainly traded on a stock exchange. The quotation or price of a particular joint stock company is set on the basis of the supply and demand with respect to the respective stock. The amount of the quotation primarily depends on economic results of the company and development on the market.
The quotation is also affected by other factors, such as: The development of the company's market share, conclusion of a significant contract, entry of a strategic investor, development of the branch in which the company operates, development of the entire economy, change in interest rates, development of the exchange rate of domestic currency, stability or instability of the political environment, etc.
