Answer #1

Companies use several ways to raise capital for current operations and expansions. Some of the common methods include taking loans, issuing shares, issuing bonds and many others. However, most business es prefer using shares as a means of raising capital. When you hold several shares of several companies, then that is considered as your stock.

1. Shares

Shares are units issued by an organization when raising funds. They are essentially certificates issued to people after application and they stand for a certain value that is already predetermined. There are various kinds of shares and they are usually issued by an organization according to the regulations of the nation where they are offered.

An individual who holds shares of an organization has the freedom of taking part in yearly meetings as a part owner. Furthermore, the holder also receives the annual dividend, which is usually decided by governors of the organization. The worth of shares is usually affected by the current supply and demand condition. This means during times when buyers are more than sellers, the shares increase in value. It is therefore risky to invest in shares since it the price is unstable and can result in losses when the market crashes.

2. Stocks

Stocks are basically the overall amount of shares an individual holds in one organization or in several organizations. Stocks of an organization are regarded as the overall units of shares that make an individual an owner in that organization. There are two kinds of stock, preferred stock and common stock. The preferred stocks are allocated dividends before common stock holders. Furthermore, the dividend worth is normally higher in preferred stocks than common stocks.

These two investment instruments are beneficial to an organization as they help raise funds. Shares are essentially the single units, while stocks are collective shares.

Answered By: daniel [554 ]