Understanding:Shares

Hello All,

Today lets understand what is this share and how did it come into existance? First of all we have to understand that there are 2 types of companies 1. Private Ltd(Limited) 2. Public Limited.

In this private limited companies , to start a company one person or few people join hands , put their own money / get some bank loans. This amount is called the capital and this will help them in running the entire company from buying raw materials to end.

So when these private Ltd companies want to expand themselves, they need to invest more isnt it ? so to collect this huge capital amount one of the ways they adapt is to ask public for the money. How do they do this is by introducing shares. For example say a company ABC wants 5 crore Rs, what they do is that they will announce that they are ready to give 50 Lakh shares of Rs 10 each. This Rs 10 is called the "face value" of the share. And number of shares is 50,00,000.

This private Ltd company now becomes a public Ltd company by offering shares . When this offering is done for the first time , it is called an IPO..."initial public offering". Shares here actually means sharing the companies owner ship i.e. when you buy shares , u become a part owner of the company and that is why you get the companies profit as a dividend every year :P ... Ok thats all for today .. There are more to know...This is just some intro for understanding shares better :P

Please let me know your comments :)