1

Share (finance)

Securities

In financial markets, a share is a unit of account for various financial instruments including stocks (ordinary or preferential), and investments in limited partnerships, and real estate

investment trusts. The common feature of all these is equity participation (limited in the case of preference shares). A unit of ownership that represents an equal proportion of a company's capital. It entitles its holder (the shareholder) to an equal claim on the company's profits and an equal obligation for the company's debts and losses. Two major types of shares are (1) ordinary shares (common stock), which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings, and (2) preference shares (preferred stock) which entitle the shareholder to a fixed periodic income (interest) but generally do not give him or her voting rights. See also stock. A corporation divides its capital into shares, which are offered for sale to raise capital, termed as issuing shares. Thus, a share is an indivisible unit of capital, expressing the contractual relationship between the company and the shareholder. The denominated value of a share is its face value: the total capital of a company is divided into a number of shares.[2]

The income received from shares is known as a dividend. A shareholder, also known as a stockholder, is a person who owns shares of a certain company or organization.[3] The process of purchasing and selling shares often involves going through a stockbroker as a middle man.[4] Valuation Shares are valued according to various principles in different markets, but a basic premise is that a share is worth the price at which a transaction would be likely to occur were the shares to be sold. The liquidity of markets is a major consideration as to whether a share is able to be sold at any given time. An actual sale transaction of shares between buyer and seller is usually considered to provide the best prima facie market indicator as to the "true value" of shares at that particular time. Concept of Share In practical te rm s , shares are individual pieces representing an equal stake in the capital of a business organization. The number of shares make the respective holder eligible to receive a certain part of the profits made by that company. The shares also help the respective holders to be able to lay claim to a part of the worth of the specific company. This is applicable, however, only when there is liquidation. Definition of Share According to financial terminology the share is regarded as a unit of account that can represent several monetary instruments, such as stocks, REITs, mutual funds, or limited partnerships. In Great Britain the term "shares" usually refers to stocks. Dividend The earning that the holder of a share makes from his or her shares is called the dividend. Dividends are actually part of the profits of the company whose shares may be held by the respective holder. These are non-reinvested profits Tax treatment Tax treatment of dividends varies from territories to territories. For instance, in India, dividends

are tax free in the hands of the shareholder, but the company paying the dividend has to pay dividend distribution tax at 12.5%. There is also the concept of a deemed dividend, which is not tax free. Further, Indian tax laws include provisions to stop dividend stripping.[5][citation needed]

Stock certificates Historically, investors were given stock certificates as evidence of their ownership of shares. In modern times, certificates are not always given and ownership may be recorded electronically by a system such as CREST.

Share Market Basics What are the basics of financial instruments? A: Let us understand the two fundamental types of investments, namely bonds and stocks with an example. Eg. Imagine you want to start your own grocery store. You will need a capital amount to get started. You acquire the requisite funds from a friend and write down a receipt of this loan ' I owe you Rs 1, 00,000 and will repay you the principal loan amount plus 5% interest'. Your friend has just bought a bond (IOU) by lending money to your company. Thus a bond is a means of investing money by lending money to others. When you invest in bonds, the bond you buy will show the amount of money being borrowed (face value), the interest rate (coupon rate or yield) that the borrower has to pay, the interest payments (coupon payments), and the deadline for paying the money back (maturity dates).

There are several Pro's and Con's to investing in bonds Pro's Bonds give higher interest rates compared to short-term investments. Bonds are less risky when compared to stocks.

Con's Selling bonds before they're due, may result in a loss, known as a discount. If the issuer of the bond declares bankruptcy, you may lose your money. Hence you must critically evaluate the credibility of the issuer of the bond, ensuring that he has the capability to repay the bond amount. Now, let us continue with the same example. To accrue more capital for your new grocery store, you sell half your company to your brother for Rs 50,000. You put this transaction in writing 'my new company will issue 100 shares of stock. My brother will buy 50 shares for Rs 50,000.' Thus, your brother has just bought 50% of the shares of stock of your company. Thus, to explain stocks: Stocks, also known as Equities, are shares in a company. It is the certificate of ownership of a corporation. In simple terms, when you invest in a company's stock or buy its shares, you own part of a company. Thus, as a stockholder, you share a portion of the profit the company may make, as well as a portion of the loss a company may take. As the company keeps doing better, your stocks will increase in value and yield higher dividends. Dividend: A sum of money, determined by a company's directors, paid to shareholders of a corporation out of its earnings. This example covers the 2 major types of investments: bonds and stocks

Rewinding

back

to

the

Stock

Market

Trading

history

of

India

A: In the earlier days, stockbrokers kept scouting for 'natural' sites to conduct their trading activities, shifting from one set of Banyan trees to another. As the number of brokers kept increasing and the streets kept overflowing, they simply had no choice but to relocate from one place to another.