All companies need money to run their business. Sometimes the profit acquired from selling goods or services is not sufficient to meet the working capital requirements. And so, companies invite normal people like you and me to put some money in their company so that they can run it efficiently and in return investors get a share of whatever profit they make. Understanding this is the first step towards understanding stock market basics. Let’s learn about this in detail.
What are shares?
Shares are a way to own a part of the company’s value. In proportion to the capital you invest, you can get ownership rights to a certain percentage in the company. Say you own 2% of the shares being traded in the market, you can say you have 2% ownership in the company.
Hence, shares are units of ownership in the company and its financial assets. Shares are also known as stocks, equity, scrips etc. After purchasing them you will be known as a stockholder or a shareholder of the company.
Why do companies need shares?
Why does a company need money from the market? As mentioned before, when a company is scaling up, expanding its business etc, it will need more capital. During such times, a company can tap into the share market and offer a certain number of shares based on its market value, which investors can buy.
Investors will be paying the company some money and in return get to be part owners. So when the value of shares rises, the value of shares investors own rises. Investors are however not lending money to the company so they are not creditors. These indeed share market basics for beginners because it is essential to understand why companies need shares at all.
How does a company list its shares?
Another important aspect of share
, , Basics of Stock Market, bse, equity, Face Value, IPO, NSE, Shares
