What Does It Mean to Buy Stock?

A stock is a portion of a corporation, sold at a particular price to aid in establishing or expanding the company’s operations. Each time a company needs more funds, the corporation may choose to sell additional stock.

When stock is available for purchase, buyers can buy a part of the ownership in the corporation. The proceeds from the stocks help to expand the company, establish it, or purchase equipment.

The amount of ownership in the company depends on the number of shares a stockholder owns. If there are 50 shares of stock available and a stockholder buys 40, he then has an 80-percent stake in the company.

Companies may choose to distribute revenue, known as dividends, between stockholders. Dividends and the amounts depend on how much revenue the company makes. When the company’s debt exceeds the revenue, the corporation may choose to only sell additional stock.

Stockholders may earn additional shares once stock price reaches certain levels. Some corporations allow these stocks to split, meaning stockholders will gain additional stock. These stocks, when split, reduce the amount they are worth depending on how they split. For example, if the stockholder has one share and it splits, the stockholder now owns two shares that are each worth half of the original stock price.