From the course: Foundations of Treasury Management

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Stock markets

Stock markets

From the course: Foundations of Treasury Management

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Stock markets

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- A stock market is a mechanism for shareholders to exchange ownership shares. Let me illustrate the social value of a stock market using something with which we are all familiar: buying a car. Let's say you are going to buy a brand new car for $30,000. After five years, this car can be sold as a used car for $15,000. So let's think about that original transaction. You buy the car for $30,000, who pays the $30,000? Well, you do. You are buying the car. Who receives the $30,000? The car dealer does. That's a simple transaction. That's a new car transaction. Five years later, when you sell the used car for $15,000, who pays the 15,000? The person who buys the used car from you. Who receives the 15,000? You do, you're selling your used car. And who doesn't get anything from that used car sale five years later, out of the 15,000? The original car dealership doesn't get anything from the 15,000. There is no direct…

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