[Hot News] [STOCKS] - What it means to own shares or stocks in a company?

When you buy a stocks or shares or equity of a company, you are essentially becoming a part owner of the company. Although this part size of the ownership may be very less depending on the number of shares you have bought to the total number of shares disbursed by the company in total, the notion of part ownership of the company still exists for a shareholder of that company.

What about owning bonds of a company?

Often we might have heard about people talking about owning shares or bonds in a company. Although the context at which people use the terms of bonds or shares during normal discussions seem the same, the stocks and bonds are operational under two different premises.

When you hear someone say they own a bond of a company, what they essentially mean is that they are a part "lender" to that company.

Eg: If you buy a bond at a face value of $1000 a bond and there are over 1000 members who have done the same, each of you are lending $1000 * 1000 = $10,00,000 to the company.

Learn about a company's assets and debts here

Going back to stocks, the stockholders as said earlier are part owners of the company. Thus if a company owns $100 million in assets and also has a debt through loans and bond issues valued in total at $80 million, then what is left for these owners is nothing but (the total assets - the total debt) of the company. In this case $20 million is the final amount left to the company owners. This is then called the owner's equity.

Thus,

Equity = Assets - Liabilities

Now, if we assume there were a total of 2 million shares disbursed by the company, then we have:

$20 million / $2 million = $10 in equity per share.

[Hot News] [STOCKS] - What it means to own shares or stocks in a company?

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