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Questions and Answers
What do shares represent in a company?
Shares represent small portions of companies' ownership stakes.
What do investors expect when they purchase shares?
Investors expect to receive dividends and potential price appreciation of their investment over time.
What rights do you have as a shareholder when you buy a company's stock?
As a shareholder, you have rights to the company's earnings and assets.
What does owning more shares in a company potentially result in?
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What is the difference between common shares and preferred shares?
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Which type of shareholders receive dividend income before common shareholders?
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Study Notes
Shares refer to small portions of companies' ownership stakes, also known as stocks. Companies issue shares to raise capital from investors, who purchase them with the expectation of receiving dividends - regular payments made out of profits by companies to their shareholders - and potential price appreciation of their investment over time. When you buy a company’s stock, you become one of the many owners of that business, meaning you have rights to its earnings and assets. Each share represents part ownership of the issuing corporation. For example, if you own ten shares of IBM stock, this means you hold 0.000007% of Big Blue. Holding more shares can increase your percentage of ownership in the company, which may result in higher returns on investments.
Shares come in different types, including common shares and preferred shares. Common shares give you voting power, allowing you to vote at annual general meetings and elect board members or executives. On the other hand, preferred shares don't offer the same level of involvement but generally pay stable, fixed dividends and rank ahead of common shares when it comes to corporate bankruptcy. Preferred shareholders receive dividend income before common shareholders do.
The value of a share is determined by factors such as the company's financial performance, industry trends, market conditions, management quality, and expected future growth rates. When buying shares, you want to choose companies whose products and services meet strong demand and which consistently deliver high levels of profitability and rapid revenue growth. But remember that investing always involves risk. If a company does poorly, the value of your shares will decrease, meaning your return could suffer. To minimize your losses, look for companies making solid progress towards becoming global leaders in their respective industries while ensuring they maintain a good balance between production costs and revenues.
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Description
Test your knowledge about shares, stock ownership, dividends, types of shares, factors influencing share value, and strategies for minimizing investment risks. Learn about owning parts of companies through acquiring shares and the rights and responsibilities that come with it.
