A share in stock market refers to individual units which are sold by the company to its shareholders so that they can be part of the profits of the company. Shares can be of many types, given below are the various types of shares which are issued by the company –
- Equity Shares – Equity shares are the most popular type of shares, equity shares are those shares which give the shareholder a part in the profits of company in the form of dividend and capital appreciation. Equity shares are the most risky type of share because equity share price tend to fluctuate the most and also equity shareholders get dividend only after payment of interest on debentures and dividend to preference shareholders.
- Preference Shares – Preference shares are those shares which get fixed dividend, irrespective of profit or loss earned by the company. However there is no scope for capital appreciation in case of preference shares and also preference shareholders are not entitled to vote.
- Bonus Shares – Bonus shares are issued by the company to its existing shareholders free of cost so as to capitalize the profits of the company. Bonus shares are issued to existing shareholders in certain proportion which may be 1:1 or 1:2 and so on.
- Right Shares – Right issue or right shares are those shares which are issued by the company to its existing shareholders when it is in need of money for expansion purpose, these shares may be issued at lower than current market price of the stock.