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home / study / business / accounting / questions and answers / when the stock market is going up over a long period ... Question When the stock market is going up over a long period of time, investors can become complacent about the risks of being a stockholder. After the significant decline of the stock market in 2008, people have begun to rethink the risk involved in owning stock. What kinds of risks do the owners of publicly-traded companies face? What could you do, as an investor, to continue to invest in the market but minimize your risk? Select two companies that you would invest in if you had the money. Find their financial statements on the Internet and examine the shareholders equity section of their balance sheets. What does your analysis tell you about each firm? Is this a good investment? Explain your findings and conclusion.
Explanation / Answer
Ans:- In 2008 the stock markets in every country gone to decline because of the market condition and international trade factors.Decline in stock market it gives public a risks involved in owing stock markets.
The biggest disadvantages involved in going public are the costs and time involved. Experts note that a company's management is likely to be occupied with little else during the entire IPO process, which may last as long as two years. The business owner and other top managers must prepare registration statements for the SEC, consult with investment bankers, attorneys, and accountants, and take part in the personal marketing of the stock. Many people find this to be an exhaustive process and would prefer simply to run their company.
Another disadvantage is that going public is extremely expensive.
Other disadvantages involve the public company's loss of confidentiality, flexibility, and control. SEC regulations require public companies to release all operating details to the public, including sensitive information about their markets, profit margins, and future plans. An untold number of problems and conflicts may arise when everyone from competitors to employees know all about the inner workings of the company. By diluting the holdings of the company's original owners, going public also gives management less control over day-to-day operations. Large shareholders may seek representation on the board and a say in how the company is run. If enough shareholders become disgruntled with the company's stock value or future plans, they can stage a takeover and oust management. The dilution of ownership also reduces management's flexibility. It is not possible to make decisions as quickly and efficiently when the board must approve all decisions. In addition, SEC regulations restrict the ability of a public company's management to trade their stock and to discuss company business with outsiders.
Invest in the market to minimize risk we have to take some steps to reduce it. like
1.Analysts Recommendations,2.Money Management,3.No crushing Debt
If i have money to invest in stock market which i took preference for those two companies which i invest is that first one POWER sector related company which has strong sound financial statements.and another one is petrolium related sector which is having financially strong for the last two years.these two sectors would gives us good returns and they are very less risk free sectors and their financial statements are storng and marketing conditions also good.
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