What is Stock?

You have probably heard a popular definition of a stock: “A share is a part of the ownership of a company that represents a claim on the stock company’s property and income as you receive more stocks, your ownership stake in the company is more “Unfortunately, this definition is incorrect in some important ways.

To get started, stockholders do not have corporations; They are the owners of shares issued by corporations but the corporation is a special type of organization because the law considers them as legal persons. In other words, corporations can tax, borrow, property themselves can be prosecuted, etc. It is an idea that a corporation “person” means that the corporation owns the property, a corporate office deals with the corporations filled with chairs and tables, and not the shareholders.

This distinction is important because corporate assets are legally separated from the shareholders’ property, which limits both the corporation and the shareholder’s liability. If the corporation is insolvent, then a judge can sell all his property – but your personal property is not at risk. The court can not even force you to sell your shares, although the value of your shares will be greatly reduced. Similarly, if a major shareholder becomes bankrupt, then he can not sell the property of the company to pay his creditors.

What is the shareholders of the shares issued by the corporation; And the corporation is the owner of the property, so if you hold 33% of the shares of a company, then it is wrong to claim that you will take one-third of that company; It is right to say that you own 100% of the company’s shares of one-third of the shares. Shareholders can not do this because they do with a corporation or its assets. A shareholder can not get out of a chair because the corporation is the owner of that chair, not the shareholder. This is known as “Being different from ownership and control”.

So what are the good shares, then, if they do not actually have ownership rights, then we think they are? The owner of the stock gives you the right to vote in shareholder meetings, receive the dividend (which is the company’s profits), and when it is distributed, and it gives you the right to sell your share to someone else.

If you hold a majority in the shares, then your voting power increases so that you can control the direction of a company indirectly by appointing your board directors. This becomes most apparent when a company buys another: the acquiring company does not buy buildings, chairs, employees; It buys all the shares The Board of Directors is responsible for the increase in the value of the corporation and often does this by hiring professional managers, or officials, such as the chief executive officer, or the CEO.

For normal shareholders, not being able to manage the company is not such a big deal. The importance of being a shareholder is that you are entitled to a portion of the company’s profits, which we will see, the foundation of the stock’s value. The more share you can have, the share of the same benefits you will get. However, many stocks have not paid dividends, and in return, the company has again invested in profit in rising sales. The income generated by these, however, are still reflected in the value of the stock.

Stocks – Sometimes referred to as equity or equity – companies are issued to raise capital to raise business or to start new projects. There is a significant distinction between whether a company buys shares directly from a company when it issues them in the primary market or from the other shareholder (on the secondary market). When the corporation shares, it does so for money

Companies can raise money through borrowing, either directly from the bank or by issuing loans, known as bonds, bonds are basically different from the shares in many ways. First of all, bondholders are creditors for the corporation and are entitled to interest, as well as principal repayments. In case of bankruptcy, creditors are given legal preference from other stakeholders and if a company is forced to sell the property to repay them, then it will be fully done. On the other hand, in the event of the shareholder being insolvent, they are finally in line and often do not get anything on the dollar, or only the panels get. This means stocks are bonds of natural risk, which are bonds.