What is a share? A share or a stock represents ownership or a share in the assets of a company. If a company has issued 100,000 shares of $10 each, each holder of a share has ownership in that company in proportion to his share holding.
A shareholder, as one of the owners of a company, is entitled to a portion of the company's profits ( or losses ) to the extent of his holdings. This can be increased or decreased by buying or selling more shares.
|Companies are bound to keep their shareholders informed how they are faring. This is accomplished by distributing to shareholders annual reports and quarter reports. As ownership of companies vest in shareholders, all important decisions are made by them. It is for this purpose that annual general meetings, special general meetings and extraordinary general meetings are held - to pass accounts, approve dividends, decide on mergers or sales of subsidiaries and elect directors. Shareholders exercise their votes at these meetings in proportion to their holdings.||
Share or stock are traded in stock exchange to sell or buy the shares.
Shares or stock may be issued only to the amount authorized in the memorandum and articles of association of a company. The amount issued is known as the issued share capital and this can be below the authorized share capital as the total number authorized may not be issued. Issued shares may be partly or fully paid depending on how the company calls for the subscribed shares. The amount called up on a shared is known as it's paid up value. When the full value is called up, it becomes fully paid and the shareholder has no further liability.
Why companies issue shares? The reason for companies to issue shares is to raise fund for them to expand their business. Issuing shares is one of the effective method to raise fund for expansion. The companies manage to collect fund from the public to return their debts and expand their business while the investors stay a chance to gain the capital gain and dividends. Hence, share investment or stock investment is a win-win solution for both companies and investors.