Question

Explain the importance of stock exchanges from the point of view of companies and investors.

Answer 1

Stock exchanges enable the companies to raise the funds and the investors can contribute in return for profits.

• The companies may require funds in huge amounts to expand their business. Thus they can borrow this money in the form of capital, debentures, and loans from the public by listing their shares on the stock exchanges. These stock exchanges monitor the daily trading of these shares.
• The investors can participate by buying these shares in IPO or FPO. They can buy or sell their shares in the stock exchanges through a broker. The employees at these exchanges ensure that there are no unfair trade practices in trading the shares.

Thus, the stock exchanges channel the money from the public to the companies.