Company Shares

[andyfromotley]

yes thanks for that. it is formed by the top 100 shares on the LSE tho?

andy

 

[buggi]

yea, it is. but i think it was the Financial Times that "invented" the FTSE 100... which is where the name comes from. I think they basically took the idea of using the top 100 companies as a benchmark for how well the whole of the London Stock Exchange is doing and it got nicknamed the FTSE 100... so basically if the top 100 companies are doing well, so is the rest, if they are doing crap, so are the rest. Hence why when you listen to the finance part of the news they refer to the FTSE 100 going up or down and closing at the a certain rate at the end of day... or something like that.

 

[buggi]

Take something simple like a bike shop, The owner wants to expand and buy a 2nd shop in the next town. He lacks funds, does not want a bank loan, so he divides his business into 100 equal shares. He might keep 51 of these share so he maintain overall control and sells to people 1/100 of his business. This brings in fresh money to allow him to expand, but all these people own a small element in his business and will demand that he tells them about how their investment is going. He might also be required to give them a share of his profit each year.

What a fab way of describing it... even i understand it!

 

[JtB]

Futures, options, that kind of thing. They are tradeable items based on the value of an underlying stock, index or other variable.

I was hoping someone might relate this in someway to the bike shop analogy.