What do shares of stock in a company actually represent?
When a company decides to raise capital to grow its operations (and its opportunity for increased profits), one option they may exercise is to “Go Public” – to issue and sell stock to the market through an Initial Public Offering (IPO). Any buyer of common stock effectively owns a piece of that business. The ownership of common stock in a company represents ownership interest and voting rights in guiding the objectives of the organization indirectly through its board of directors. The value of the stock is based on market selling prices on any given day. Another important component of owning common stock is the entitlement to dividends should the company be in a position to issue these returns on the investment. In essence, the profits of a company are often distributed back to the shareholder should these earnings be more than the forecasted needs or obligations of the company. This distribution is better known as earnings per share (EPS). In calculating the value of a stock, the mark
