and Brokerage To start any big business, a large sum of money is needed. It is generally not possible for an individual to manage such a large sum. Therefore the total sum of money can be divided into equal parts called shares . The holder of shares are called shareholders .
. . Types of shares: There are two type shares namely common (or equity) and preferred . Generally, the profit gained by the company is distributed among their share holders The preferred share holders have a first claim on dividend.
When they have been paid, the remaining profit is distributed among the common share holders. . . Definitions (i) Capital stock is the total amount invested to start a company.
(ii) The share purchased by the individual is also called stock . (iii) The persons who buy the shares are also called stock holders (iv) Face value : The original value of a share at which the company sells it to investors is called a face value or nominal value or par value. It is to be noted that the original value of share is printed on the share certificate. (v) Market value : The price at which the stock is bought or sold in the market is called the market value (or cash value).
The market value of a share keeps on changing from time to time . - - Remarks: (i) If the market value of a share is greater than the face value then, the share is said to be above par (or at premium). (ii) If the market value of a share is the same as its face value then, the share is said to be at par. (iii) If the market value of a share is less than the face value then, the share is said to be below par (or at discount).
Dividend : The profit gained by a company, distributed among their share holders is called dividend. It is calculated on the face value of the share. Dividend is expressed as percentage. Some useful results: (i) Investment: Money