Stock

Posted in Finance, Accounting and Economics Terms, Total Reads: 716
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Definition: Stock

Stock is another word for share or equity. It is defined as the stake or ownership of the investors in a company. In other words, this investor has a claim on a part of the company’s earnings and assets. This claim is proportional to the percentage of the total shares of the company he holds. Value of the stock held by a stockholder is obtained by multiplying the number of shares he holds multiplied by the share price.

Total stock value for a company is obtained by settling the claims such as debt.

 

Formula : stock value = Revenue – (expenses + depreciation + taxes) – claims such as debt= Net Income

 

Value of one stock = net income/number of outstanding shares


Example –

Suppose Company X has $10000 as its revenue, $1000 as the claims on the debt taken and $4500 as the sum of the expenses, depreciation and taxes. Then the total stock value of X is

10000 – 1000 – 4500 = $4500

 

Now, if X has 450 outstanding shares, then value of one stock = $4500/450 = $10

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