ECON 201 Lecture Notes - Lecture 26: Financial Instrument
28 Apr 2019
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Document Summary
Investing in the stock market carries risk, but when approached in a disciplined manner, it is one of the most efficient ways to build up one"s net worth. Stock: (share or equity) is a financial instrument that represents ownership in a company or corporation and represents a proportionate claim on its assets (what it owns) and earnings (what it generates in profit. ) Stock ownership implies that the shareholder owns a slice of the company equal to the number of shares held as a proportion of the company"s total outstanding shares. For instance, an individual or entity that owns 100,000 shares of a company with 1 million outstanding shares would have a 10% ownership stake in it. The main distinction between the two is that common shares usually carry voting rights that enable the common shareholder to have a say in corporate meetings, while preferred shares generally do not have voting rights.
