A corporation divides its capital into shares, which are offered for sale to raise capital, termed as issuing shares. Thus, a share is an indivisible unit of capital, expressing the contractual relationship between the company and the shareholder. The denominated value of a share is its face value: the total capital of a company is divided into a number of shares.
In financial markets, a share is a unit of account for various financial instruments including stocks (ordinary or preferential), and investments in limited partnerships, and real estate investment trusts. The common feature of all these is equity participation (limited in the case of preference shares).
The income received from shares is known as a dividend. A shareholder, also known as a stockholder, is a person who owns shares of a certain company or organization. The process of purchasing and selling shares often involves going through a stockbroker as a middle man.
Shares are valued according to various principles in different markets, but a basic premise is that a share is worth the price at which a transaction would be likely to occur were the shares to be sold. The liquidity of markets is a major consideration as to whether a share is able to be sold at any given time. An actual sale transaction of shares between buyer and seller is usually considered to provide the best prima facie market indicator as to the "true value" of shares at that particular time.
Concept of Share In practical terms, shares are individual pieces representing an equal stake in the capital of a business organization. The number of shares make the respective holder eligible to receive a certain part of the profits made by that company. The shares also help the respective holders to be able to lay claim to a part of the worth of the specific company. This is applicable, however, only when there is liquidation.
Definition of Share According to financial terminology the share is regarded as a unit of account that can represent several monetary instruments, such as stocks, REITs, mutual funds, or limited partnerships. In Great Britain the term "shares" usually refers to stocks.
Dividend The earning that the holder of a share makes from his or her shares is called the dividend. Dividends are actually part of the profits of the company whose shares may be held by the respective holder. These are non-reinvested profits
Tax treatment of dividends varies from territories to territories. For instance, in India, dividends are tax free in the hands of the shareholder, but the company paying the dividend has to pay dividend distribution tax at 12.5%. There is also the concept of a deemed dividend, which is not tax free. Further, Indian tax laws include provisions to stop dividend stripping.
Historically, investors were given stock certificates as evidence of their ownership of shares. In modern times, certificates are not always given and ownership may be recorded electronically by a system such as CREST.
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- Hoang, Paul (2007). "1.4 Stakeholders". Business and Management. Victoria: IBID Press. p. 71. ISBN 1-876659-63-7.
- "How to Buy Shares". ShareWorld. Retrieved 23 February 2012.
- "All about shares and tax". Rediff India Abroad. 16 January 2006. Retrieved 23 February 2012.