What is a share

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What are ‘Shares’ or “stocks”

A simple question of whether shares and stocks are the same can be answered easily. If you own a single share then you have 1 share. If you own multiple shares then you have a stock. So in other words, stock is just plural for a word share.

Shares and stocks are the very same thing.

A share is a unit of ownership in a company or an asset. Based on shares the profit is equally distributed. If a person holds more shares he or she receives more profit. There are 2 main types when it comes to shares.
These are:

  • common shares
  • preferred shares

In the beginning shares were in a form of a certificate (paper). Nowadays, shares are mostly in electronic form.

Difference between common stock and preferred stock

When a company or corporation is founded and established, owners can choose to issue preferred stock and common stock.

In general, majority of the companies will issue common stock. Main advantage of common stock is that a shareholder gains a voting right in which he or she can influence on business decisions that the company takes in the future. While shareholders of common stock receives earnings from dividends, such stock is generally considered riskier than proffered stock.

Preferred stock usually does not offer appreciation in value or voting rights in the company. Usually this kind of stock typically has set payment criteria; a dividend that is paid on a regular basis, effectively making the stock less risky (less risky when compared to common stock). Also, preferred stock may often be redeemed at a higher price than common stock. Because preferred stock takes priority over common stock, if the business goes to bankruptcy and pays its lenders, preferred shareholders receive payment before common shareholders.

 

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