What are shares for?- IELTS AnswerKey

What are shares for?- IELTS AnswerKey


21 B
1 C 22 G
2 A 23 A
3 E 24 C
4 C 25 F
5 D 26 C
6 high-tech company 27 A
7 (the) market capitalisation 28 F
8 (the) casino    
9 growth stocks   RAEADING PASSAGE 3
10 tycoons  
11 TRUE 29 vii
12 NOT GIVEN 30 x
13 TRUE 31 i
14 FALSE 32 vi
    33 ii
  35 iv
15 FALSE 36 v
17 TRUE 38 C
19 TRUE 40 A


A. A company which is registered on the stock exchange offers shares under its ownership to anyone who wants to buy them. A large company may issue tens of millions of shares. Among different types of shares, the most common are called ‘ordinary shares’. when you buy one, you become partner, or shareholder in the company, and share profits, attend board meetings and vote on key issues and appointments. You can sell your shares anytime you want.

B. The price of a share gets regularly updated; it may have not much relation to the cash value of the company if all its assets gets sold. In cases where the company owned buildings were grossly undervalued than it should have been. In contrast, when the stock markets is climbing, many companies are valued at sky high prices in the stock market than their real value. As such, there are new challenges to valuation like how do you value a high-tech company whose products keep on changing every two months, and whose bread earners are its talented employees?

The constantly changing difference between the market capitalisation (the total value of all a company’s shares at the current market price) and the ‘real’ value is one of the great topics of stock market evaluation.

C. Shares are a volatile property- their prices do not remain steady as people buy and sell them continuously. A lot of factors influence the share price, including company analysis, change in politics, natural disasters, cold wars and economic up-downs. One of the main factors is the behaviour share holders. If huge chunk of investors think the price of a share is going to rise and buy it, the price of the share will rise until they stop buying.

This kind of volatility is a temporary phase. In the long term, shares in reputed companies are thought to be good investments than those in bad companies.

D. The capitalist financial system’s big business is central to the world’s present economic system. Since the 1990s, there has been no other system competing with it. Thus, people who want to increase their assets must learn how it works, and will decide to participate in the system at some point in their lives.

The strongest, best-established companies are known as ‘Blue chips’. The world of the casino gave it the name Blue chips, where they are those with the highest value. The other term – ‘secondary issues’ are shares in solid companies. These have slightly low confidence than the blue chips. “Growth stocks” are shares in newer companies that are supposed to do quite well in the time to come, but which may not do so. Finally, there are the “penny shares”, which belong to companies with a low value, but which may increase for some reason or the other.

E. Companies normally start out by being privately owned. Later when they expand, the owners may opt to go ‘public’ and sell some shares on the stock market. There are strict rules of going public, the company must be worth buying. The advantage to the original owners is that they can realise very large sums of cash if the offering is successful.

However, some owners prefer to keep control in their hands by staying private, while others may buy back all company shares and return the company to private ownership. Taking a stock market-listed company back into private ownership is rare, but when it is done the aim is usually to strengthen control over the decision-making process. For instance, business tycoons may decide they can do a better job of building the business by making a company private because the red tape and other shareholders’ interference is much less.

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