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- Stock Market 101 Quiz For Savvy Investors
Stock market 101: Quiz for savvy investors
1. Why do companies raise funds through the stock market?
Correct option is B - Companies raise funds through the stock market via the issue of shares or equity to the public. These funds are used to fuel expansion, innovation, or operations, take on new projects, etc. Instead of raising funds through loans, they raise it from investors, who, in turn, become shareholders in the company.
2. What is an Initial Public Offering (IPO)?
Correct option is A - An Initial Public Offering (IPO) is when a private company decides to offer its shares to public investors through a stock exchange for the first time. It acts as a gateway for regular investors to purchase a share of a company and offers the company a chance for large-scale fundraising.
3. Choose a statement from the following that best describes a dividend.
Correct option is C - Dividends are a portion of the company’s profits that it decides to distribute to its shareholders in proportion of their shareholdings. It is a means to reward the shareholders for their investment and trust. However, all companies don’t necessarily give out dividends and some might even choose to reinvest their profits for future growth and expansion.
4. In the context of an IPO, what do listing gains mean?
Correct option is B - If the IPO stock of a company opens at a higher price than its issue price on the listing day, it is known as listing gains. Listing gains are the profits an investor can make if the above-mentioned condition is fulfilled.
5. What role does the stock exchange play in the secondary market?
Correct option is A - Through an IPO, companies can list their shares on the stock market where they are traded among investors in the secondary market. Stock exchanges such as BSE and NSE in India are essentially a platform that ensures shares can be purchased and sold in a smooth, regulated, and transparent environment. This is needed to maintain the market’s integrity and investor’s trust.
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This content is intended solely for informational purposes. The views expressed in this content are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this content.
