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Term Definition

Definition: The smallest unit of company ownership that can be purchased from a corporation and later bought and sold among investors.

Example: WTR Corporation has sold 1,000,000 shares to the public, making them *outstanding*. A person purchasing 100 shares from a current owner will own 100 / 1,000,000th of the company.

Investeach explains: Companies raise money by selling shares of stock to investors. A share in a tiny "penny stock" corporation can literally sell for a penny (and often, much less)! In the case of Berkshire Hathaway Corporation (symbol BRKA), a single share is usually worth more than $200,000!

There are generally two types of stock: common and preferred. They come with different rights and privileges. Unless otherwise noted, a discussion of shares of stock refers to the corporation's common stock.

The selling price for a share can be very misleading. For example, if Frugle sells for $500 and Macrisoft $25, does this mean that Frugle is 20 times more valuable a company than Macrisoft? No. The reason is that we haven't considered how many shares of each company exist and are in the hands of investors (ie, shares outstanding). If it turns out there are 30 times more Macrisoft shares in existence than Frugle shares, Macrisoft would be the more valuable company.

Riddle me this:

1. What are the two common types of stock?
2. How do shares get into investors' hands in the first place?
3. What do we call companies that have a very low price per share?
4. Why is a company's common stock price not a good indicator of the overall value of a company?
5. Which publicly held corporation has the highest value per common share?

U.S. Indices

1 S&P 2,439.07
+0.77 (0.03%)    
2 DOW 21,409.55
+14.79 (0.07%)    
3 NASDAQ 6,247.15
-18.10 (-0.29%)    

Financial Literacy for All!

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