Sunday, June 22, 2008
What is share?
Share is the part which we get in process of dividing an entity. For example, three students reside in a single room of a hostel, which means that room is shared between three students. In other sense each students is one-third owner of that room. Sharing figures prominently in gift economies, but also plays a significant role in market economies. The word stock simply refers to a supply. You may have a stock of T-shirts in your closet or a stock of pencils at your desk. In the financial market, stock refers to a supply of money that a company has raised. This supply comes from people who have given money to the company in the hope that the company will make their money grow.
Suppose a group of persons or a business organization propose to start a new project, or want expansion of their company which they are unable to arrange, thus invite the public to be a part of the project. The company as per laws of the government announces the issue of shares through which any eligible person (18 or above in age, have a demat account) can become a shareholder of the company. For example, the value of ABC company has been divided into 100 shares and I own 10 shares of that company that means I am the owner of 10% in that company. In financial markets, a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. A share is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends (When a corporation earns a profit or surplus, that money can be paid to the shareholders as a dividend.) , and to a portion of the value of the company in case of liquidation( refers to the process by which a company or part of a company is brought to an end, and the assets and property of the company redistributed).
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