Concept of Share

A share is referred to as a unit of ownership that represents an equal proportion of a company’s capital. Every company should have capital in order to finance its activities. When the capital of a company is divided into a number of units of fixed value, then such units are called shares of a company. Shares are units of equity ownership interest in a corporation that exists as a financial asset providing for an equal distribution in any residual profits, if any are declared, in the form of dividends.

Shares represent equity ownership in a corporation or financial asset, owned by investors who exchange capital in return for these units.

In other words, a share in one of the units into which the total capital of the company is divided. Shares represent equity stock in a firm, with the two main types of shares being common shares and preferred shares. Share is a fractional part of the total capital of the company. A share entitles the shareholders to an equal claim on the profit and losses of the company. It is the proportional part of the share capital and forms ownership in a company.

In other words, a share represents the extent of ownership or interest in the assets and profits of the company. Common shares enable voting rights and possible returns through price appreciation and dividends. Preferred shares do not offer price appreciation but can be redeemed at an attractive price and offer regular dividends.

A share is issued by a company in the form of a certificate under its common seal. It is a personal and movable property, which can either be mortgaged or pledged, or transferred. A share represents fractional ownership in a body corporate. Thus, a share is the smallest unit of the company’s overall net worth. It is measured by a sum of money for the purpose of liability and of interest (dividend) of its holder. When an investor invests money in the stock market, it has the potential to grow rather than keeping money in a savings account.

The persons who contribute money through shares are known a ‘ shareholders’. Shareholders receive income from the shares they own on a routine basis – these are called dividend payments. A shareholder enjoys certain rights such as right to dividend, right to vote and is liable to pay the unpaid balance on the shares if any. The value of a share that a company issues depends on its face value – the capital of a company divided by the total number of shares. A firm’s authorized capital refers to the maximum amount in shares it is allowed to sell.

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