Course 101: What Is the Purpose of a Company?
Ownership Interests
In this course
1 Introduction
2 Money In, Money Out
3 The Two Types of Capital
4 Different Capital, Different Risk
5 Returns on Capital versus Returns on the Stock
6 Ownership Interests

When it boils down to it, stocks are ownership interests in companies. Each share provides its holder with voting rights to elect a company's board of directors as well as to vote on certain important company decisions, such as whether or not to accept a merger offer. The more shares one owns, the greater one's voting power.

Perhaps more importantly, each share provides an ownership interest in the profits of a company. The more shares one owns, the greater this interest and the potential dividends. It's also important to keep in mind the number of shares outstanding a company may have. It's better to own one share of a billion-dollar company that only has 100 shares outstanding (a 1% ownership interest) than it is to own 100 shares of a billion-dollar company that has a million shares outstanding (a 0.01% ownership interest).

The bottom line is that stocks are just one of several types of investment vehicles, and one that represents ownership interests in companies. Being a stockholder means being a partial owner of a business.

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