2 Basics: What is a Share?

In the previous blog we learned about a company. Now we are going to learn about Share.

But before that we need to learn about Capital. Capital simply means the money that is needed to start/run a company. The money we put into starting a company is called Capital. We can buy buildings, machinery, furniture etc needed for the company from the Capital. I can start a private company by just 1 lac capital but in order to start a establish a public company we require a minimum of 1 crore capital. 

To explain the concept of share let us take an example of 10 friends who are in a bakery and wants to buy a cake. Since the cake costs 1000 rupees they collected 100 rupee each and bought the cake for 1000 rupees. While distributing the cake they sliced the cake into 10 equal pieces and distributed among 10 of them. In this example one slice of cake represents  1 SHARE and each friend is a Shareholder because Each one of them paid 100 rupees for 1 share of cake. 

Just like that cake, when a public company is arranging money for its capital it ask money from the people and in return gives  the Company's Share to the people and thus  people will become the shareholders of that company. Suppose the company has divided 1 crore into 1,00,000 shares of 100 each that is to say in order to have 1 share I need to pay 100 rupees. So if i pay 50,000 rupees then I can have 50,000 divided by 100 rupees that is 5000 shares of that company. In share market we buy and sell such shares.