Shares are a fundamental component of corporate finance, allowing companies to raise capital by issuing shares to investors. When individuals or institutions purchase shares, they become partial owners of the company and can benefit from its growth and profitability. Shares can be categorized as common or preferred, with common shares typically offering voting rights and dividends, while preferred shares provide fixed dividends and priority over common shares in asset distribution during liquidation.
Shares Example
For example, if you buy 100 shares of a company that has issued 1,000 total shares, you own 10% of that company. If the company earns a profit and decides to distribute dividends, you would receive a portion of those earnings based on your ownership stake.