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Advantages of share any 4? |
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Answer» Preeti Nice Answer... Advantages of Shares for InvestorsThese\xa0characteristic entitlements are granted to owners of ordinary shares.\tThe first is\xa0voting rights.\xa0Common shareholders can participate in internal corporate governance through voting. Ordinary shares provides a small degree of ownership in the issuing company. Stockholders have a certain amount of say in how the company is run and are allowed to vote on important decisions, such as the appointment of a board of directors. For each share of\xa0common stock\xa0owned, the stockholder gets one vote, so the stockholder\'s opinion becomes weightier when he or she owns more shares.\tWhile this may be an important advantage for an individual or\xa0institutional investor\xa0who controls a large percentage of a company\'s stock, for the average retail investor, the main benefits of common shares are found\xa0in their potential for\xa0capital gains and dividends, which represent the two ways common shareholders profit from their ownership.\tFor individuals, investing in the\xa0stock market\xa0is a relatively straightforward way to generate income. While there are no guaranteed profits, almost anyone can open an online\xa0trading account\xa0to buy and sell shares of publicly traded stock. In addition to its transactional simplicity, investment in ordinary shares has the potential for unlimited gains, while the potential loss is limited to the original amount invested.\xa0Selling shares at a higher price than the original\xa0purchase price\xa0results in the investor\xa0realizing a\xa0capital gain. However, the opposite can also happen; shareholders may realize a\xa0capital loss\xa0if they sell shares for less than they paid for them.\tWhen a company turns a profit, it often rewards its investors by paying a small portion of that profit to each\xa0shareholder\xa0according to the number of shares owned. While this dividend is not guaranteed, as with\xa0preferred stock, many companies pride themselves on consistently paying higher dividends each year, encouraging long-term investment.\xa0Shareholders may elect to\xa0reinvest dividends\xa0or receive them as income.\tOther stockholders\' rights include\xa0limited liability, i.e.,\xa0common shareholders are protected against the financial obligations of the corporation and are only liable for their shares\' value. They also gain\xa0preemptive rights. Shareholders with preemptive rights gain access to new share issues before the rest of the investing public, often\xa0at a discount.Advantages of Shares for CompaniesFor businesses, issuing common shares is an important way to raise capital to fund expansion without incurring too much debt. While this dilutes the ownership of the company, unlike debt funding, shareholder investment need not be repaid at a later date.Of course, shareholders do expect returns on their investments, either through stock growth or dividend payments. But the company always has the option to\xa0repurchase\xa0some or all of its\xa0outstanding shares\xa0if and when it no longer has need of\xa0equity capital, thereby consolidating ownership\xa0and increasing\xa0the value of shares still available by reducing the supply.\xa0 |
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