Key Points

  • Shares allow individuals and companies to become part-owners of a business
  • Investing in shares provides potential for control, dividends, limited liability, and entitlement to company assets
  • The price of shares can fluctuate based on supply and demand and there is no guarantee of specific return on investment
  • Investing in shares can be a valuable addition to a diversified investment portfolio
  • It's important to understand the risks and do research before investing in shares

Shares, also known as equities, are a form of investment that allows individuals and companies to become part owners of a business. When a company decides to go public and sell shares, it is able to raise capital in the capital market by dividing its ownership into small parts, known as shares. These shares can then be purchased by investors, who become shareholders and partners in the profits generated by the company.

For companies, issuing shares is a way to obtain financing in the capital market and continue with their business or develop new projects. For investors, owning shares provides a number of benefits, including the potential for control, dividends, limited liability, and entitlement to the company's assets.

One of the main advantages of investing in shares is the potential for control. As shareholders, individuals and companies have the right to manage the firm, although this responsibility is typically delegated to the company's directors.

Shareholders also have the potential to earn dividends if the company makes a profit, and are entitled to a portion of the company's assets if it goes bankrupt.

Have you ever thought of having your own company but when you are about to do it, you realize that the investment you have to make is very high? Or if you have your own company, have you thought about getting financing in the capital market? And if you are not interested in having your own company, have you considered owning a small part of Coca Cola? or small part of At&T Inc

Image Description

If these questions have ever presented themselves to you, this note is for you, because today we will talk about shares.

First of all, you should know that shares are small parts in which the capital stock of a company is divided. The owner of these shares, the shareholder, is the person or company that owns these parts of capital and therefore becomes a partner in the profits generated by the company.

For companies, the shares are used to obtain financing in the capital market and thus be able to continue with their business or develop new projects, since they can divide their capital and put these shares up for sale in exchange for money from investors, who become new partners.

Image Description

Unlike buying a debt security of the company, owning shares gives you a series of rights

Control

Since the shareholders are the owners of the company, they ultimately have the right to manage the firm. Generally, shareholders delegate this responsibility to the company's directors since they are the ones who are immersed in the day-to-day running of the company.

Collection of dividends

Every for-profit company seeks to make money with its business and you being a shareholder (since you invested your money in the company) will want to participate in the profits after paying all the expenses such as employee salaries, taxes, etc. In other words, with each share you own you will be entitled to receive a dividend if the company made a profit that year. The dividend may be paid in cash or it may be reinvested in the business again for further growth.

Image Description

Limited Liability

One of the reasons why stocks are one of the general public's favorite investments is that the shareholder's liability to the company is limited to the investment he/she made in the company. If the company is profitable and growing, as a shareholder you share in the profits and growth of the firm after all expenses are paid. On the other hand, if the business continues to show losses and the debts are greater than the company's assets, you have no choice but to sell your shares to exit the business.

Entitlement to the company's assets

Not everything is rosy when you invest in shares. We already told you about many advantages, but you should also know that if the company goes bankrupt, all its assets have to be liquidated to pay the debts it owes to its suppliers, creditors, government, etc. And then, only after all the above debts have been paid, the remaining balance is distributed among the shareholders. This means that while the potential returns are greater, the risks are also greater than with other financial assets.

Image Description

You should know that the price of shares varies according to supply and demand. This is how, as a shareholder, in addition to earning dividends if the company did well in that year's business, you can earn money if you manage to sell your share at a higher price than you bought it.

The downside of investing in AT&T stocks?

Being equities, as the name implies, you don't know in advance what return you will get on your investment. Although you can estimate what profit you can have, you must understand that this can be lower or higher than what you estimate and, in short, it depends on the risk you are willing to assume to obtain higher income.



About AT&T INC.


  • Ticker T
  • Exchange NYSE
  • Sector Communication Services
  • Industry Telecom Services
  • Shares Outstandng 7,126,000,128
  • Market Cap $118B
  • Description
  • AT&T Inc. provides telecommunications, media, and technology services worldwide. Its Communications segment offers wireless voice and data communications services; and sells handsets, wireless data cards, wireless computing devices, and carrying cases and hands-free devices through its own company-owned stores, agents, and third-party retail...
More about T