There are thousands of companies in the stock market as well. Stock market consists of buyers and sellers of stock or shares in the market. Basically, there are two types of companies and they are addressed below:

·  Private Limited Company: Private Limited Company shares aren’t available to everyone and only a few people are able to purchase its ownership.

·  Public Limited Company: Public Limited Company shares are available to everyone to purchase.

For example: Suppose there’s a company called ABC which supplies great quality software in the market compared to its competitors and because of which their demand for software started increasing more than their capacity, that’s why ABC company took the decision to expand their operation. But the challenge would be the lack of sufficient funds for the expansion of the operation. In such situation, company has two common ways to raise funds:

·  Debt Financing: Taking debt from the bank

·  Equity Financing: Sell the shares of the company

With debt financing if the company took a loan from the bank, they would have to return the money eventually but also with interest. But on the other side, If the company sells their shares, they cannot only dodge the loan but also the interest with more reach of business amongst the investors in the market.

Taking everything into consideration, ABC company decided to sell its shares, doing that the buyer would get shares and partial ownership of the company and the company gets sufficient funds for their operation.

When there are more buyers than sellers, the prices of shares increase and when there are more sellers than buyers, the prices of shares decrease. This also applies to every company in the market. There are buyers and sellers every day in the market so, there’s always ups and downs in price on the market.

And also, when sellers start selling more aggressively, the rate of shares decreases. The prices of shares decrease until the buyers get aggressive and would be willing to buy shares at a higher rate. Thus, the rates of shares always get up and down.