What Are Stocks?
When a company wants to raise a capital for their business, they sell stocks, which are also known as shares. By selling shares they can sell part of the company to many part-owners or shareholders. Stocks or shares are pieces of the corporate pie. When you buy stocks or shares, you own a slice of the company, a fraction of the decision-making power, and a fraction of the profits, which the company may issue as dividends.
There are two different types of shares: common/ordinary shares and preferred shares. Common shareholder in a company is entitled to share in its profits in the form of dividends. There is no certainty that a company will make profits thus no certainty that there will be a dividend. However, the shareholder can also hope to make a capital gain from the shares by an increase in the share price. The share price will fluctuate from day to day according to company's progress and general economic conditions. Preferred shareholder on the other hand, has the right to a fixed dividend and this right takes precedence over the right of common shareholder. Preffered shareholder will also get the first chance to get some of the money they have put in if the company goes out of business.
There are two different types of shares: common/ordinary shares and preferred shares. Common shareholder in a company is entitled to share in its profits in the form of dividends. There is no certainty that a company will make profits thus no certainty that there will be a dividend. However, the shareholder can also hope to make a capital gain from the shares by an increase in the share price. The share price will fluctuate from day to day according to company's progress and general economic conditions. Preferred shareholder on the other hand, has the right to a fixed dividend and this right takes precedence over the right of common shareholder. Preffered shareholder will also get the first chance to get some of the money they have put in if the company goes out of business.
