well i never claimed to know alot, that is all i learnt from business studies GSCE. im sure there is more detail and whatever but im fairly sure what i wrote is true, at least some of it is true. but if you want me to go into more detail i will...
say you own a resturant and it will probably make at least $75,000 this year, you know that from your history with the business. so you can think of the restaurant as an investment that will pay out something like £75,000 in interest every year. looking at it this way, someone might be willing to pay £750,000 for the restaurant, as a £75,000 return per year on a £750,000 investment represents a 10% rate of return. someone might even be willing to pay £1,500,000, which represents a 5% rate of return, or more if they thought that the restaurants income would grow and increase earnings over time at a rate faster than the rate of inflation.
the restaurants owner will set the price accordingly. u might price the restaurant at £1,500,000. what if 10 people come to you and say, "wow, i would like to buy your restaurant but i dont have £1,500,000." you might want to somehow divide your restaurant into 10 equal pieces and sell each piece for £150,000. in other words, you might sell shares in the restaurant. then, each person who bought a share would receive one-tenth of the profits at the end of the year, and each person would have one out of 10 votes in any business decisions or, you might divide ownership up into 1,500 shares and sell each share for $1,000 to make the price something that more people could afford. or you might divide ownership up into 3,000 shares, keep 1,500 for yourself, and sell the remaining shares for $500 each. that way, you retain a majority of the shares (and the votes) and remain in control of the restaurant while sharing the profit with other people. in the meantime, you get to put £750,000 in the bank when you sell the 1,500 shares to other people.
stock at its core represents ownership of a companys assets and profits. a dividend (payment) on a share of stock represents that shares portion of the companys profits, normally paid yearly. if the restaurant has 10 owners, each owning one share of stock, and the restaurant makes £75,000 in profit during the year, then each owner gets a dividend of £7,500. a large company like IBM has millions of shares of stock outstanding. in this case, the total profits of the company are divided between those millions and sent to the shareholders as dividends.
also you spelt experience wrong.
