What is Share?

 

What is Share?

If a Company’s capital is divided equally in certain units, then they are share of company. The main purpose of share is certain right in capital of a company.

A share represents a single unit of ownership in a company.

When a company wants to raise capital to fund operations, expand, or pay off debt, it can divide its total equity into small, equal units called shares and offer them to the public or private investors. When you purchase a share, you become a shareholder—meaning you own a fractional piece of that business.

Core Types of Shares

  • Equity Shares (Ordinary Shares): The most common type. Holders receive voting rights on major corporate decisions and may receive variable dividends based on company profitability. However, in the event of liquidation, equity shareholders are paid last.
  • Preference Shares: Holders do not usually have voting rights, but they receive a fixed dividend rate and have preferential priority over equity shareholders when dividends are distributed or if the company dissolves.



 

What is equity share?

In a person want to earn maximum profit after taking maximum risk then equity share is an option. Equity share has following qualities: -

1.      Full voting rights on all matter.

2.      Dividend fluctuates based on profit.

3.      Paid last (After preference).

4.      Eligible for bonus & rights share.

5.      High risk (Market dependent).

6.      Equity holders are real owners.

7.       In case of liquidation, they last to be paid.  They receive what is left.

8.      No maturity date.

 

What is preference share?

Preference share has following qualities: -

1.      No voting rights.

2.      Fixed at a pre-set rate.

3.      Paid before equity holders.

4.      Not usually eligible.

5.      Moderate risk (More stable)

6.      Not owners.

Types of preference shares

1.      Simple or non-cumulative preference shares: - Shares were dividend is given every year.  Dividend not given gets lapsed.

2.      Cumulative preference shares: - Dividend on shares are given for previous year also and dividend does not get lapsed.

3.      Convertible preference shares: - Shareholder have right to convert their shares into simple shares within fixed time.

4.      Non-convertible preference shares: - Here shareholder can’t convert their shares into simple shares.

5.      Redeemable preference shares: - Here share can be redeemed and share amount can he returned by the company.

6.      Participating preference shares:-  If company has extra profit than it is profit dividend among such shareholders.

 

Why People Buy Shares

  1. Capital Appreciation: Selling the share for a higher price than what was paid as the company grows and becomes more valuable.
  2. Dividend Income: Receiving a portion of the company’s net profits directly into your account on a regular (quarterly or annual) basis.
  3. Ownership Privileges: Voting on key corporate resolutions, board appointments, and attending Annual General Meetings (AGMs).

Key Distinctions

Concept

Distinction

Share vs. Stock

A share is a specific, countable unit of ownership in a single company (e.g., 10 shares of Tata Motors). Stock is a broader term representing ownership across one or more companies (e.g., investing in the stock market).

Face Value vs. Market Value

Face Value is the nominal or baseline value set by the company (e.g., ₹1, ₹5, or ₹10 per share). Market Value is the price at which the share currently trades on an exchange, driven by supply and demand.

 

 To Be continued.......

 

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