Lessons in Greater Detail

Let’s look at stocks, equities or company ownership in more detail. Companies raise capital to grow their companies in several ways. Selling stocks in their company or allowing their company to be sold off into shares, is one way. We know why this happens, but how does it happen?

When a company decides to raise capital for the company, the Board of Directors meet and will “authorize” how many shares will ever be “distributed” (sold or given away) for ownership. Some of those shares may be given to company employees as incentive or bonuses as part of their benefit packages. Some may be kept by the company and not sold or distributed and kept in the “treasury” for future sale or distribution. Then some of those stocks will go public, to the stock market to sell to the public. The stock that is already distributed before the amount that goes on sale is called “outstanding shares”.

Now. Let’s look at the shares sold on the stock market (goes public)The share price of a stock (share price) is usually determined by its market cap and is represented by the company’s stock price by the number of shares outstanding. Once the stock starts selling after that, it is driven by supply and. Its share price will fluctuate all during the day. There are 4 types of stocks, meaning reasons to buy stock.

1. Share price growth. Purchasing stock at a low price and looking to increase its value.
2. Dividend Stocks. Purchasing stock of well-established profitable companies who pay dividends to their shareholders.

To be continued…