NEWS AFFAIRS 7 : WHERE EVERY STORY HAS IT'S AFFAIR!
Last updated on August 9th, 2024 at 12:14 am
Stocks also known as shares represent ownership in a company. When you buy a stock, you own a small part of that company.
Here’s a breakdown of Stocks in simplest manner :
Owning a stock means you own a fraction of the company. For example if a tech company ” Techjar ” has 100 shares and you own 1 share then you have ownership of 1% of that company.
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Benefits of Owning Stock
If the company makes profit, you get a share of those profits based on how many shares you own.
If the company sells off its assets, you get a share of what’s left after debts are paid.
Voting Power: You can vote on important company decisions, usually in proportion to the number of shares you own.
Not all stocks are the same. Some might have extra voting power, some might get paid first if the company makes money or is sold, and some might not have voting rights at all.
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Buying and Selling Stocks
Stocks can be traded on stock exchanges or privately.
Governments and regulatory bodies closely monitor these transactions To protect investors and ensure the economy benefits
What is ” Dilution ” in stock market ?
When a company issues new shares, existing shareholders own a smaller percentage of the company. This is called dilution. The company does this to raise money to grow the business.
Stock Buybacks: Companies can also buy back their own stock. This can increase the value of remaining shares and give investors a chance to make a profit.
Stock Options: Employees might get stock options as part of their compensation. This gives them the right to buy stocks at a specific price in the future. If the stock price goes up, they can buy at the lower price and sell at the higher price, making a profit.
Private Stocks: Stocks traded privately are part of private equity, a different area of finance.
In short, owning stocks means owning a piece of a company and it comes with potential benefits like earnings and voting rights. Stocks can be bought and sold, and companies can issue new shares or buy them back. Stocks can also be part of employee compensation through stock options.
Understanding Shareholders in simplest term
Who Are Shareholders?
A shareholder or stockholder is an individual or company that legally owns one or more shares in a joint stock company. Both private and publicly traded companies have shareholders.
Privileges of Shareholders
- Shareholders have special rights, which can vary depending on the class of stock they own:
- Shareholders can vote on important company matters, such as electing the board of directors.
- Income Distribution: They can share in the company’s income through dividends.
- Purchasing New Shares: They often have the right to buy new shares issued by the company.
- Company Assets: In case the company is liquidated, shareholders have a right to the company’s assets, but only after all debts are paid.
Who are Shareholders & Stakeholders ?
Those who specifically own shares in a company and have equity in the business are known as ” shareholders “.
” Stakeholders ” include anyone with a direct or indirect interest in the company, such as employees, customers, suppliers, and even volunteers in non-profit organizations. In short, shareholders are a type of stakeholder.
Duties and Legal Obligations
Fiduciary Duties: Directors and officers of a company must act in the best interests of the shareholders. Shareholders generally do not have such duties towards each other.
Minority Shareholder Protection: In some cases, courts may impose duties on majority shareholders to protect the interests of minority shareholders.
For example in California majority shareholders in closely held corporations must not destroy the value of minority shareholders’ shares.
Who are the largest shareholders?
The largest shareholders are often mutual funds and passively managed exchange-traded funds (ETFs). These institutions own significant percentages of many companies.
In short , Shareholders own parts of a company and have specific rights and privileges, such as voting on company matters and sharing in profits. They are a type of stakeholder, who may include anyone with an interest in the company. While company leaders must act in shareholders’ best interests, shareholders themselves typically do not owe duties to each other, except in special cases. Large institutional investors like mutual funds and ETFs often hold the most shares in companies.
