Understanding Stock

Understanding Stock

A stock, sometimes known as equity is the term used to refer to the percentage of ownership of a given corporation. It is what is used to determine how much of the assets or profits a shareholder is entitled to.

From time to time, a given corporation may need to raise funds to keep afloat in business. When this time comes, the corporation may sell part of its shares in a bid to raise said funds. The people who buy the shares then become shareholders of the company, according to the number of stocks bought.

Stock in simple terms is a share of a given corporation. It is not to be confused with the ownership of the said company. Let’s take an example to have a better understanding. Let’s say a corporation owns 2000 shares and you as an individual are interested in owning part of the shares. If for example, you buy 200 shares, this would mean that you own 10% of the corporation’s shares. It would not mean that you own 10% of the corporation as a whole but rather its shares in the stock market. 

Look at it this way, cooperation has assets, liabilities, earnings, and losses. If you own part of the corporation’s shares, you in essence own part of its assets. In this case, you would own 10% of the earnings and assets.

How to get stocks

Generally speaking, stocks can be bought and sold on stock exchanges. However, there are instances where stocks can also be bought from private sales. Regardless of how you choose to get your stocks/ shares, you should ensure that the transactions are above board and are not fraudulent or going against government regulations.

Are shares and corporation properties intertwined?

When looking for stock or shares to buy, oftentimes, most people get worried about what may happen if the corporation goes bankrupt. Shares are a separate entity from property owned by the corporation. For example, any furniture in the office building belongs to the corporation and NOT to the shareholder. 

In the unfortunate event of a bankruptcy, the only thing affected maybe your shares but not your ownership of them. For example, even if the corporation goes bankrupt, you will not be required to sell your shares to make ends meet for the corporation. It has no rights to sell your shares. Your shares may experience a downfall but they remain yours to sell or not to sell.

In the same breath; any shareholder has no right to sell off the company’s property to pay off creditors. To make things clearer, you as a shareholder have no right to walk off with the company’s property. You have no right to walk off with a printer, chair, table, or any other asset simply because you own some shares.  That property belongs to the corporation and not you. All you own are shares of the company. 

How much power do my shares give me?

Depending on the number of shares you own, you are limited to only voting at a shareholder’s meeting, selling your shares and receiving any distributed profits. The more shares you hold, the more power you have in terms of voting in the board of directors. 

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