Is the stock market basically like a used car lot where you can sell the used car back to the dealer for cash?

Question

A used car lots with people buying and selling used cars. If you want, you can sell the car back to the dealer at any time for whatever the car is worth at that time. Is that how it is?

Answer 1

It's nothing like the used car business. It's an asset that grows in value, and one doesn't sell it back to the company, one sells it to another investor.

Answer 2

Kind of like thta. When a company lists on the stock market it has a valuation made of how much the company is worth. This is based on company profits, future potential and assets. The company the splits itself up into shares and sells them to members of the public who then owns a piece of the company. Example

Company is valued at $10 million. The company divides its ownership into 10 million shares which means that each share is worth $1. You buy 1 million shares on the stock exchange for $1million which means you now own 10% of teh company. You are free to sell those shares at any time for whatever price you like. The value of the share is determined by whatever someone else thinks they are worth. The perceived value again can be affected by many factors such as how well the business is performing, the general state of the economy and even strange things such as the weather. Think about an Orange juice company that has to pay more for Oranges because a frost destroyed the crop. The business will now make less profit because its costs have gone up so the shares may end up going down.

Answer to second question

The company when it has lots of cash in the bank will sometimes do a stock buy back but typically you cannot sell the shares back to the company. Someone will always want to buy shares if you are selling but if they are trading poorly then you will not get a good price for them and may end up losing money.

Answer 3

You hit the nail right on the head!!

Answer 4

A stock brokerage acts like a middleman buying and selling stocks and making profits for themselves on the difference and commissions.  Much like a used car dealer or real estate agent.

Answer 5

No.

It's more like eBay.

Answer 6

It's a place to sell to other investors.  Sometimes a company will make purchases of it's own stock and then retire the shares, but this is rare.  Most transactions, the issuing company is not involved.

If nobody wants to buy it, it means you bought junk and should have done your homework.