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Hedging

If you are unsure of how the price of a security is going to move, you can hedge. In hedging, you take a position that protects you from an adverse price movement.

Initial Public Offerring:

The very first sale of stocks to the public is called an initial public offering (IPO), and occurs on the primary market.

An initial public offering (IPO) is the first sale of a corporation's stock to outside investors. This does not necessarily mean that a company is a new business. It simply means that the company is offering shares of ownership to investors outside the corporate "family" for the first time.

Most businesses are privately owned. They do not have "outside" investors. A few people, who may be management or employees and members of their respective families, own all the outstanding stock. Such corporations are referred to as "closely held corporations." These companies are usually small, but some are nationally recognized names such as AVIS Rent-a-Car and United Parcel Service.

When a privately held corporation needs additional capital, it can borrow cash or sell stock to raise needed funds. Often "going public" is the best choice for a growing business. Compared to the costs of borrowing large sums of money for ten years or more, the costs of an initial public offering are small.

Concluded.

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* Contributed by: -
Prof. M. Guruprasad is Senior Faculty for Economics, Finance and Research, with AICAR Business School Raigad / Mumbai. He has more than 15 years of experience in research and educating / training management students. He was research scholar with the University of Mumbai. Worked as Executive in the Marketing research industry. Also Conducted Workshops and Training programmes. He has published articles in various industry magazines, newspapers and has initiated many discussions on academics.