How a Joint-Stock Company Work

Updated April 30, 2021

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How a Joint-Stock Company Work essay

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Have you ever been on your phone looking at the Nasdaq or the Dow Jones and wonder how this all got started? Joint-stock companies take place all around the world, in all different lines of business. For example, they are present in technology, recycling, manufacturing, and even helped start a couple colonies. A joint-stock company were usually low risk companies that were ran jointly together by shareholders. Investing in joint-stock companies have become such a great way for the average person to make money. Joint-stock companies were started by the concept of buying, evaluating, and selling stocks.

To understand how joint-stock companies work we must know how they got started. The first joint-stock companies trace back to the 13th and 14th century were they were called “communities” and “societies” with the very first company being the bank of Geno. The Bank of Geno had a total of 20,400 shareholders and these companies then followed to Holland. In 1595 the Dutch East India company was established by Johan van Oldenbarnevelt. This was considered one of the most successful companies even to this day. The success of this company depended on how well their next trade was gonna be.

The Dutch East India company really drew a lot of commotion because it really got people thinking about this line of business. This then later caused the establishment of the East English India Company. Everything in Europe changed though after the discovery of the New World ion 1495. The english start the Virginia Company of London in 1607. The purpose of this colony is to get a successful english colony started in the New World. The name of the colony was called Jamestown after the King of England James I. The money that went to the colony was for them to mostly search for gold, later on though the introduction of tobacco saved the colony. The Virginia Company was doing so well and making suck a profit that the king turned it into a royal colony so that he would make all the income.

Buying stocks weren’t as simple as they were today. Before people yelled on trading floors business was help mostly in coffee shops. Stocks were originally handwritten on a piece of paper and that is how investors traded them. People never really understood how important stocks were and how valuable they would become. The New York Stock Exchange was founded in 1817. The New York Stock Exchange became one of the most powerful stock markets because of the lack of competition. The only other stock market at the time was the Philadelphia Stock Exchange. Today anybody in the world could buy stocks and that is why it became such a big business. People are able to buy stocks just by using their phones.

The buying of stocks is a simple process with a lot of moving parts.When somebody wants to buy a stock he or she needs to get in touch with a broker. A broker’s job is to arrange transactions between a buyer and a seller for a commission when the stocks are sold. Another important job in the stock industry is a financial analyst. The job of a financial analyst is to analyze the stock market and give suggestions on what to invest in. Stocks bought in multiples of 100 are called round lots. Also stocks bought fewer than 100 shares are called odd lots. Once in possession on the stocks it is important to track the company’s progress.

Everyone around the world are able to track the progress of the stock market using the index system. The Index system was invented by a Wall Street journalist and also the cofounder of the Dow Jones Company, Charles Dow The name of the Undex system is called the Dow Jones Industrial Average or also called the Dow. The Dow is composed of 30 large public companies and the purpose of the Dow is to gauge on howell the stock market is doing. Also one cna check on how well a single company is doing by using the point system. The point system is used to show how much a stock costs increases or decreases each day. In the point System one point equals one U.S dollar.

To further evaluate how a company is doing is to read and understand market charts. Using the picture provided one can see that the little dashed marked line is to represent the price of a share.This is shown to demonstrate the constant flux of a share through each day. Also the straight solid lines are to show the moving average. The moving average shows the trend of a stock through a given quarter but does not predict future prices. The bar graph on the bottom is the volume. The volume is the number of shares or contracts traded in a entire market during a time period.

The volume is also helpful to measure the relative strength of a company. The relative strength is a tool used to compare one company’s stock to another. A good example said by Chad Langanger of Investopedia is, “If the price of Ford shares is $7 and the price of GM shares is $25, the relative strength of Ford to GM is 0.28 ($7/25).” This is a helpful instrument because it is easy to company companies in the same business and how they compare to each other.

The value of a share can fluster upwards and downwards. Investors try to predict how a company will progress or do in the future. Prices on a stock can increase based on multiple different scenarios. The first and probably most common is high demand. When lots of people see how well a certain market or company is doing they all try to get shares but there is only so many and in action the price goes up. Another way stock price can go uo is if a company passes their expected quarterly sales. The quarters are pretty simple and are used to break down how a market performed in different parts if the year. Quarter one is from January to March, quarter two is from April to June, quarter 3 is from July to September and quarter four is from October to December.


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