1. What Is a Share?

   • A share represents ownership in a company. When you hold shares, you become a part-owner of that company.

   • Companies divide their capital into equal units, which we call shares. Each share represents a fraction of the company’s ownership.

   • Shareholders (also known as stockholders) hold these units, and their rights and privileges are directly tied to the number of shares they own.

Types of Shares:

• Equity Shares (Common Shares):

  • Most common type of shares issued by companies.

  • Holders of equity shares have voting rights in company decisions.

  • These shares participate in the company’s profits (dividends) and losses.

• Preference Shares:

  • Holders of preference shares receive fixed dividends before equity shareholders.

  • Typically, preference shares do not carry voting rights.

  • In case of liquidation, preference shareholders have priority over equity shareholders in receiving assets.

• Initial Public Offering (IPO):

  • When a company decides to raise capital by offering shares to the public for the first time, it conducts an IPO.

  • During an IPO, shares are made available to investors, allowing them to become shareholders.

  • Once listed on stock exchanges, these shares can be bought and sold by anyone.

• Share Capital and Face Value:

  • The total value of all shares issued by a company is its share capital.

  • Each share has a face value (denominated value) mentioned on it.

  • Face value multiplied by the total number of shares represents the company’s capital.

  • However, the real value of shares is determined by market demand and supply.

Rights and Responsibilities of Shareholders:

• Rights:

  • Voting rights in company decisions (for equity shareholders).

  • Dividends (profits) in proportion to the number of shares held.

  • Participation in important decisions (e.g., mergers, acquisitions).

• Responsibilities:

  • Attend shareholder meetings.

  • Stay informed about company performance.

  • Comply with legal requirements.

• Market Value and Trading:

  • The market value of shares fluctuates based on investor sentiment, economic conditions, and company performance.

  • Shares are traded on stock exchanges, allowing investors to buy and sell them.

  • Liquidity—the ease of buying or selling shares—helps investors determine their value.

Let’s explore the concepts of market capitalization, dividends, and becoming a shareholder in more detail:

Market Capitalization (Market Cap):

1. • Definition: Market cap represents the total value of a public company. It is calculated by multiplying the share price by the total number of outstanding shares.

   • Significance: Market cap reflects public opinion about the company’s net worth. Larger market caps often indicate well-established companies with substantial influence.

Dividends:

    Purpose: When a company makes a profit or has surplus funds, it can distribute part of that profit to shareholders as dividends.

Forms of Dividends:

• • Cash Dividends: Paid directly to shareholders in cash.

  • Bonus Shares: Additional shares given to shareholders.

  • Share Repurchase: The company buys back its shares.

  • Fixed Amount: Dividends are typically a fixed amount per share.

  • Proportionate to Shareholding: Shareholders receive dividends based on their ownership percentage.

Retained Earnings:

• • Definition: Profits that remain within the company after taxes are known as retained earnings.

  • Equity Section: Retained earnings are declared in the equity section of the balance sheet.

  • Reinvestment: Companies can reinvest retained earnings into their business for growth.

• Becoming a Shareholder:

  • IPO: Acquire shares through an Initial Public Offering (IPO) when a company goes public.

  • Secondary Market: Buy shares from existing shareholders in the secondary market (stock exchanges).

Remember, being a shareholder allows you to participate in a company’s success and share in its profits.