Know more about a stock exchange

Basically a stock exchange is a market where buying and selling of shares,debentures and securities is done.The common stock exchanges are london stock exchange,new york stock exchange etc.
Only public companies are approved by the stock exchange have their share listed or quoted.
TYPES OF SECURITIES TRADED ON THE STOCK EXCHANGE
1)gilt edged securities
2)securities issued by local authorities and other public authorities
3)debentures
4)preference shares
5)ordinary shares-also described as equities
6)shares that may be listed on the stock exchange from other countries.

Gilt edged securities;these are fixed interest securities issued by the government.The government borrow by selling these securities to the public and other financial institutions.They are described as gilt edged because there is no risk of government defaulting on payment of interest or repayment of loan since the government is by far the largest borrower in an economy and so it wouldn't be surprising to note that the largest single market in a stock exchanged is gilt edged market.

Debentures;these are not shares but are simply documents which acknowledge a loan to a company.A debenture is infact a kind of a loan and therefore debenture capital is defined as loan capital,unlike a shareholder a debenture holder is not the owner of the company.Debentures carry a fixed rate of interest that must be paid weather a company makes profit or not.The claims of a debenture holder are met before those of a shareholder and sometimes they are secured with surity of company property.This means that when a company defaults the debentureholder may seize some the company assets to sell in order to obtain the money.Such debentures are called secured debentures.

Preference shares;as the name suggests,the owners of the shares get prefential treatment.They have the right to share in profits before the the holders of other types of shares.These normally carry a fixed rate of interest.
Cummulative preference shares carry a right to any arrears of interest accumulated during years when the company did not earn enough profit to pay a fixed rate of interest.Some companies issue participating preference shares which carry a fixed rate of interest and additional payments from the profits when the company is in good years.Preference shareholders do not have a vote at the annual general meeting,but may be entitled to vote when the company has not been able to make payments on these shares.

Ordinary shares;owners of these shares carry much of the risk because they have no guaranteed income and they are at the end of the queue.They are entitled to the remains of the profits after distribution of profits to other people with the claim on profits.This means that in bad years they might not receive any dividends,but in good years they might get quite get alot.Since these type of shareholders are at risk they carry voting rights meaning that they have the powers to change the company management,perhas even the company policy,at annual general meetings,these power are also important in takeover bids.

FUNCTIONS OF THE STOCK EXCHANGE
*it helps government to borrow on long term basis,most shares carry no date of repayment.Debentures and long term government securities may be repayable for years

*it influences the way saving are invested,the stock exchange is a free market and share prices frequently change as conditions of supply and demand change.The prices of shares in companies which are successful or which are believed to have good prospects will tend to rise as demand for them increases and the opposite will happen to those of companies that are not doing fine.Therefore this movement in share prices will influence the way savings are invested.

*it also provides a means of valuating financial assets,when wealth is held in other forms other than money,its often difficult to measure their value.For exampleThe price which was paid for a piece of land or a house is not usually a good indication of its present value.In case of shares,debentures and government securities which are sold on the stock exchange,however,this problem does not arise.The prices of these securities are published daily and its always possible to know their present value