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.
- Princeton WordNet: Stock
- U.S. Securities and Exchange Commission: Direct Investment Plans: Buying Stock Directly from the Company
- RL Rouse: Buying Stocks: Advantages and Disadvantages
- Economic Education Web: Economics Lesson
- Yahoo! Finance. "Berkshire Hathaway Inc. (BRK-A)." Accessed March 19, 2020.
- Stocksplithistory.com. 'Home." Accessed March 19, 2020.
Sherry Morgan has been professionally demonstrating her writing ability since 2005. Within her writing career, she has written for Ask.com, Associated Content, Textbroker, and an extensive list of personal clients. She is currently working on her Associate of Applied Science degree in business management at MGCCC, focusing on business and creative writing.