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The US stock markets · lesson 1 of 20

What a share is

A share is a unit of ownership in a company. Whoever holds it is a shareholder: they share in the profits, if these are distributed, and normally have the right to vote at the shareholders' meeting in proportion to the shares they hold.

The value of a share depends on how much investors are willing to pay for a part of the company's future profits. This is why the price changes all the time, even when the company announces nothing new.

The shareholder comes after the creditors. If the company goes bankrupt, debts are paid first and only what is left goes to the shareholders. This is why shares can return more than bonds but can also go to zero.

Questions

1. What does a share represent?

A unit of ownership in the company

Whoever buys a share becomes an owner, not a creditor.

2. What does the price of a share mainly depend on?

Investors' expectations of future profits

The price reflects how much the market is willing to pay for expected profits.

3. In a bankruptcy, when are shareholders repaid?

After the creditors, with what is left

Shareholders are last in line: debts are paid first.

Next lesson: The exchanges: NYSE and Nasdaq

Continue from lesson 4

The US stock markets: an online course in 20 short lessons with quizzes and a final certificate, on Unicorn Academy.

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