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Wednesday, 23 November 2016

All you need to know about Stocks, Shares and ShareHolders

In this blog post of mine, I would highlight some crucial business terms of our stock market. You might have heard about both these terms ‘stocks and shares’ in your day to day life. Generally, people consider both these as same, but there is a little bit of difference between the two. Earlier both STOCKS and SHARES are referred to  pieces of paper (called stock certificate) that denote ownership in a particular company. However, in terms of basic definition, stock is the ownership certificate of any company whereas share is the ownership certificate of a particular company.

Now let’s understand what these stocks and shares mean to the investor?

If an investor purchases the stock it means stocks are purchased by an investor in one or more companies i.e it has an ownership in one or more companies. However, if an investor purchases the shares it means the shares are purchased of a particular company(i.e ownership is held in the profits or losses of a single company).

As a conclusion, we may say that both share and stocks are the same thing and this minor distinction between the two can be overlooked.


SHAREHOLDERS: 

In a layman’s language, the person who buys shares in a company is called a shareholder and has a full claim on part of the corporation's assets and earnings. Professionally, A shareholder (or stockholder) is an individual or company that owns one or more shares of stock in a company legally. However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors. Both private and public traded companies are comprised of shareholders and these Companies are listed at the stock market. 

POWERS/RIGHTS OF SHAREHOLDERS:

Shareholders are granted special privileges depending on the class of stock, including the right to vote on matters such as:
  1. Electing “board of directors” of the company, 
  2. The right to share in distributions of the company's income, 
  3. Purchasing of  new shares issued by the company, and
  4. The right to a company's assets during a liquidation of the company.
However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors.

Some rights of the shareholders are subordinate to the company’s creditors right because shareholders are a company's owners, they reap the benefits of the company's successes in the form of increased stock valuation. If the company does poorly, however, shareholders can lose money if the price of its stock declines.

Above 3 terms- shares, stocks and shareholders are most commonly used in stock market. It’s the value of stocks and shares that decide the growth of the company in a given period of time and are important terms to understand the business growth.



Written by Deepak Sharma
An ambivert by nature and a keen business editorial reader. I believe - "Either write something worth reading or do something worth writing"


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