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What are Shares?

by Kusum Joshi

Shares are a unit of ownership of a company that exists in the form of dividends, if any, as a financial asset that provides an equal distribution of residual profits. As the value of the company increases, the shareholders enjoys capital gains.

It represents company stocks, and the two main types of stocks are common stock and preferred stock. As a result, “these both ” are commonly used interchangeably.

Types of Shares

According to Article 43 of the Companies Act 2013, stocks can be broadly classified into two types.

1. Equity  Stock

Firstly , Equity stock , most common type of stock issued by a public company to raise capital. Generally, common stock holders enjoy voting rights, which able them to attend the company’s general and annual meetings, and also entitled to the company’s surplus.

2. Preferred Stock

Secondly , Preferred stock provides special rights or incentives, especially with respect to the receipt of dividends and the repayment of capital when the organization liquidates.

Therefore , different types of preferred stock found based on structure, maturity conditions, nature of dividend payments, etc. Here are some common types:

Cumulative Preferred :

  1. Overdue receives in subsequent years
  2.   When your profits are inadequate, you don’t lose anything.
  3.   A fixed dividend rate guarantees.

Non Cumulative:

  1.  When profits are inadequate, they get nothing.
  2.   A fixed dividend rate guarantees.

Preferred Stock to participate

  1. You have the right to share surplus profits
  2.   Fixed dividend guarantees

Non-participating Preferred :

  1.  Do not share surplus profit.
  2.   A fixed dividend rate guarantees

Convertible Preferred

It converts to common stock within a certain period of time.

Non-convertible preferred

 It can’t gets converts into shares.

Redeemable preferred :

Stock , that the company may repay for a period of time or earlier.

Non-redeemable preferred :

  1. It will only be repaid at liquidation.
  2. There is no redemption arrangement. ..

Therefore, there are two types of stock: stock and preferred stock. Both have their own subcategories. After learning about stocks and their types, you all settle down on your investment journey into the stock market. Remember to always focus on trusted and trusted financial partners to open your Demat and trading accounts. Rely on an intermediary that can provide a state-of-the-art trading platform with real-time market updates.

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