If there are in total 10,00,000 shares issued by a company, owning one stock means the ownership of 1/10,00,000 of the company. It includes the ownership in the assets, the debts, the trademark,earnings etc.
Basically the ownership of a stock does not mean that one gets a say in the working of the company on a day to day basis, but that one has the right to cast the vote in the Annual General Meeting where the company decides on the major issues and on the way the company is to be run.
The stock could be of two kinds, Common and Preference. A preference stockholder gets a fixed dividend, no matter whether the companies makes profit or not! Also, in the case of liquidation, they get a right to the assets before the Common shareholders. To a reader it might seem stupid to buy a Common stock, but then because the dividend is fixed, the share price is also generally fixed!!! thus the preference stock holder does not get much return(Golden Rule: No risk, No return!!) . Actually many consider preference stock to be a kind of bank deposit. Note that the share price of common stock is no way related to that of the preference stock
More often than not a small investor will only trade or invest in normal shares. So, throughout this Blog we will deal with Common stocks and not Preference Stock, unless specified otherwise.
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