Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Shares

What it is:

Shares are units of ownership in stocks and partnerships.

How it works (Example):

The unit of ownership of a company is usually referred to as a "share." It is a single unit that represents equity in the company's capital structure. The owners of shares are called "shareholders." The distribution of shares in a company indicates the distribution of ownership in the company.

A share's value in a company or an investment is based on the price at which a share is sold in the market. One basic measure of a company's worth is market value, which is the number of outstanding shares multiplied by the price of a share.

Market Valuation = Number of Shares Outstanding X Share Price

Why it Matters:

Investors are granted a variety of rights based on their ownership of shares in a company or investment. Most important, however, their shares represent equity in the company, and, as a result, may have tax consequences when their equity is sold.

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