stock, corporationI hear a lot about this, but don’t have any idea about it. Can anyone help me?
Edit for additional clarity: The context here is stock as it relates to ownership in a corporation.
A stock is a fraction of ownership in a company.
People who own stock are called shareholders. The amount of stock owned by a shareholder is quantified by a number of shares which is usually a counting number or positive integer (but not always as fractional shares are sometimes, though rarely, seen).
The total number of shares owned by all shareholders represents 100% ownership of the company.
Shareholders purchase stock in order to earn a return on their investment of capital. This happens one of two ways.
The share price will change over time. If the share price goes up and the investor sells at a higher price than they paid then their profit (a/k/a gain or capital gain) is the difference between their purchase price and their sale price. (If the price declined, then their loss a/k/a capital loss is the same difference.)
The company can, and often does, make cash payments to shareholders called dividends. These funds come from either a share of the profits earned by the company during the time period since they last paid dividends or, alternatively, from retained earnings (money the company earned prior to the last issuance of dividends that the company had retained and not yet distributed to shareholders).
Warning NOT an expert Please correct any errors. Thank you.
Stock is also a component of the company’s ability to access capital, when making stock available for purchase. By selling stock, the company is selling a portion of the ownership, to the shareholder in exchange for the shareholder’s immediate cash investment. This is opposed to a company taking out a loan, which would be accompanied by interest payments.
Since there are a limited number of stock notes available for one company, the price of the stock is subject to the free market. The more people are interested in buying the higher the value. The more people interested to sell, the lower the value. When stable, a company may decide pay a portion of profits to the shareholders in forms of dividends.
The shareholders are entitled to votes for decisions concerning Board positions.
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