What is Share Business, Reasons behind issuing share by a company, Risks involved in Share Business:
What is 'Share':
In plain and simple, share is the owner ship of a company. Share represents a claim on the company’s assets and earnings. As you acquire more shares, your ownership stake in the company becomes greater. Whether you say share, equity or stock, it all means the same thing.
Why does a company issue share?
A company could keep the profits and earnings for the owners of the company. In order to extend market share or get bigger asset, at some point every company needs to raise money. To do so, company can either borrow it from somebody or raise it by selling part of the company, which is known as issuing share. The first sale of share by a company is called the Initial Public Offering (IPO).
Risk involvement in share:
This is a very important factor you believe in risk when you want to invest in share market. There is no guarantee of what percentage of capital you will gain, where and when the share price stops in up-end or low end and how long it takes to get the profit. It is true, no company or institute can guarantee. However, you can measure the risks in various ways. That is why it is essential to do some “Home Work” on a company before you invest. The Home Work should be calculating earning per share (EPS), total debt, relative price strength, profit margins, volume, industry leader and so non. You can also reduce the risk by diversifying the portfolios and measuring the correlation between a share and market index. A less risk taker has options to invest in Bond 9fixed returns) or a company that provides dividends at the end of the year. However, investors need to measure”expected rate of returns” first and it should be high enough to compensate the investors for the perceived risk of the investments. Risk is contrary to the positive profit, but there is also bright side. Taking a greater risk demands a greater return on the investments.
What is 'Share':
In plain and simple, share is the owner ship of a company. Share represents a claim on the company’s assets and earnings. As you acquire more shares, your ownership stake in the company becomes greater. Whether you say share, equity or stock, it all means the same thing.
Why does a company issue share?
A company could keep the profits and earnings for the owners of the company. In order to extend market share or get bigger asset, at some point every company needs to raise money. To do so, company can either borrow it from somebody or raise it by selling part of the company, which is known as issuing share. The first sale of share by a company is called the Initial Public Offering (IPO).Risk involvement in share:
This is a very important factor you believe in risk when you want to invest in share market. There is no guarantee of what percentage of capital you will gain, where and when the share price stops in up-end or low end and how long it takes to get the profit. It is true, no company or institute can guarantee. However, you can measure the risks in various ways. That is why it is essential to do some “Home Work” on a company before you invest. The Home Work should be calculating earning per share (EPS), total debt, relative price strength, profit margins, volume, industry leader and so non. You can also reduce the risk by diversifying the portfolios and measuring the correlation between a share and market index. A less risk taker has options to invest in Bond 9fixed returns) or a company that provides dividends at the end of the year. However, investors need to measure”expected rate of returns” first and it should be high enough to compensate the investors for the perceived risk of the investments. Risk is contrary to the positive profit, but there is also bright side. Taking a greater risk demands a greater return on the investments.
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