By Jack Mack
In an effort to raise funds in order to help with business expansion efforts, there are several possible options open to a company. One route that can be taken is to set up a loan, and then pay interest on the money borrowed to pay off the debt, while another method which many companies take instead is to give up some degree of ownership in the company and issue shares (or equity). In essence, shares are simply a method of representing some degree of ownership of a company. When an investor buys shares they then become a part owner of that company along with any other share owners.
By investing in shares, an investor gains a stake in the company and can become involved in choices such as who should manages it and are involved in making key decisions such as whether the business should be sold. The amount of influence an individual shareholder can exert over the running of the business is based on the total number of shares they hold as a percentage of all the company shares which have been issued. By becoming a shareholder, the investor can also expect to benefit from any profits which the company makes, in the form of a shares dividend pay out and/or capital growth through the market value of the shares increasing.
While shares are usually associated with stockmarket trading, most small companies which issue shares will sell them to friends and family, or business investors in order to provide funds to enable growth through formal equity funding finance. Sometimes shares are also offered as part of company or personal pension schemes, through endowment mortgages, given out in the course of a company privatisation or occasionally as part of a building society conversion, known as demutualisation.
Those companies that choose to offer their shares to the public are known as public companies and these shares are often bought and sold through the various stock exchanges throughout the world. The value of the shares can go up or down, depending on market forces, and whether the company is performing well, based on the laws of supply and demand. If a company is doing well, then share prices may rise, while a poorly performing company might expect share values to fall. It should be noted that the value of share can also affected by the overall level of confidence within the domestic economy as a whole, as well as the global economic climate.
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With the growth of share ownership, there has also been an increase in the amount of information that is available to potential shareholders. Government information sites like the Financial Services Authority and some corporate businesses like Barclays Stockbrokers, offer information to help visitors decide whether buying shares is the best type of investment opportunity for them, as well as guides on how to protect against the ever present possibility of potential financial loss.
Until not so long ago, the idea of owning shares was something many people thought was beyond their reach. However many people now own shares, often without knowing it, as part of their general savings investments. As times have changed there are now tremendous opportunities being created by share ownership, and some level of share dealing is within the grasp of almost everybody.
Disclaimer:
All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986.
While share dealing can offer lucrative financial opportunities for careful investors, it is always important to note that share values can go up as well as down, and all investors must gauge their own preferred level of perceived risk.
You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.
Submitted by:
Michael Hanna
About Michael
Michael is a keen writer, and internet marketer living in Scotland:
Contact details:
E-mail: samqam@googlemail.com
Phone: 0131 561 2251
Michael’s Website: Taxis Belfast
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