Costs and margins
Without shares there could be no stock markets, which are vital to every national economy. Find out how the shares trade enables companies to expand and develop, while providing sources of income to private investors and larger funds.
|Shares explained||Pricing||Trading shares||Dividends|
|What is a share?Why do companies offer shares?||Why do share prices move?Bids and offers||Ways to invest in sharesWhat you payShort selling sharesTrading times||What are dividends?When are dividends paid out?Corporate actionsDerivatives|
A share is a unit of ownership in a company, which can be offered for sale to investors.
The overall value of the company is divided up into units of equal size. Each unit is known as a share. To put this into context, if a company is worth $200 million and issues 100 million shares, each share is worth $2 – or 200 cents.
As the value of the company fluctuates, so does its share price. So investors who buy shares in a company are hoping it will grow in value, enabling them to sell the shares at a higher price.
Shares are also known as stocks. They are a type of asset or equity.
By ‘floating’ their company on a stock exchange – allowing investors to buy shares and therefore own a portion of the business – the management are able to raise capital to put back into the company.
If this money is applied wisely for expansion and improvement, it should boost the share price. So the company and its investors are heavily reliant upon each other.
Flotation is also a way for a business owner to realise a profit, particularly if they have built the company from scratch. The drawback is that they have to give up their sole control of the business, becoming answerable to shareholders.
Shares help company management raise money to put back into the business.