Stocks and Shares

Stock Capital: The amount of money required to establish or run a company is called stock capital.

Shares or stock: The whole capital of the company is divided into equal units each of which is known as a share or stock.

    Types of Capital Stocks : 

    1. Common Stock- It gives Share holders or Stock holders more right to vote over a company’s decision

    2. Preferred Stock- These stocks are like Bonds and Dividend

Shareholder or Stockholder: A person who purchases shares is called a shareholder or stockholder of the company. The company provides share certificates to its shareholders that contain information about the shares such as the number of shares allocated and the value of each share.

Dividend: It is annual profit which is distributed among shareholders annually as per share or as a percentage. It is paid on the face value of a share.

Face value: The value of a share or shock which is printed on the share-certificate is called its face value or nominal value or par value. The face value of a share does not change, it remains the same.

Market value: The shares of listed companies are traded (sold and bought), in the open market through brokers at stock-exchanges. The price at which a share is traded in the share market is known as its market value.

  • A share whose market value is higher than its face value is said to be at premium or above par. In other words, when a share is trading above face value then its price is known as at a premium or above par.
  • When a share's market value is the same as its face value, it is said to be at par.
  • When a share's market value is less than its face value, it is said to be at a discount or below par.

Types of Shares

A company can issue various types of share based on their rights but mainly are two types of shares-

1. Common Shares : Examples can be- J P Morgan Chase, Microsoft Corporation, Colgate Palmolive

2. Preference Shares : Preferred shares can be further classified as ordinary or common stocks of a company. For Example-Participatory and Non-participatory shares, Convertible and Non-convertible shares, Cumulative or Non-cumulative shares etc. 

Brokerage: It is the broker's charge or fee that you have to pay when you are trading in the market through brokers at the stock exchange. This charge is added to the cost price when a stock is purchased and subtracted from selling price when a stock is sold.

NOTE:

  • The face value of a share always remains the same.
  • The market value changes from time to time that makes trading possible.
  • The dividend is always paid on the face value of a share.
  • The investors generally invest in share, not for annual return but to sell the shares when their market value increases.

Number of shares held by a person:

Apti Stocks and Shares

Important Formulas of Stocks and Shares 

Number of shares = Total investment / Investment in 1 share = Total Income / Income from 1 share = Total face value / face value of 1 share 

Stock bought/sold = (investment × 100)/Market value = (income × 100)/R% 

Investment = (stock × market value)/100  = (Income × market value)/R%

Income/Dividend = (Stock × Rate )/100