Stock

The term stock as two main meanings in a financial context. Firstly it can mean current assets held for sale or being processed for future sale. This is a British usage synonymous with the American "inventory". The word inventory is commonly understood in Britain and sometimes used. The other meaning is "financial security", but what securities it refers to can vary.

The strict meaning of the word stock (when it does mean a security) is a security which is not divided into units, as shares and corporate bonds usually are. Companies usually divide their equity capital into shares, and all shares and purchases have to be of quantities that are a number of whole shares - it is possible to buy one share or 100 or 101, but not 100.5 shares. Stock is not divided into shares, and therefore can be traded in as small a unit as the holders wish. In practice trading systems limit the possible sizes of units.

In some countries government debt has the characteristics that meet the strict definition of the word stock. However the practicalities of trading systems make is common for there to be some minimum trading unit. For this reason, stock frequently means government and other fixed interest securities (sometimes even those that do not meet the strict definition above).

In the US the word stock is often used to mean ordinary shares, because they are the most common type of security and almost identical to common stock (ordinary equity capital not divided into shares).

The broadest meaning of the word stock is simply any debt or equity security (but not more exotic securities such as derivatives). This broad meaning justifies its use in terms such as stock market.

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