1.9What does it mean to own a part of a company?
Owning shares makes you a part-owner of the company. You get a share of its profits (if it pays them out), and usually a vote on important decisions.
Ownership is what gives a share its value. Because you own a part of the business, if the business becomes more valuable, your part becomes more valuable too.
Here is the full example. A company is worth ₹10 lakh and divides ownership into 10,000 shares. You buy 100 shares.
With 10 shares of ITC you are a real owner: you receive ITC’s dividends in your bank account and you can vote at its annual general meeting (AGM). You cannot walk into an ITC factory and take biscuits. Owners don’t run the company day to day; the board and management do.
- You: 100 shares1.0%
- Everyone else: 9,900 shares99%
- One share = ₹10,00,000 ÷ 10,000 = ₹100
- Your cost = 100 shares × ₹100 = ₹10,000
- Your ownership = 100 ÷ 10,000 × 100 = 1%
- If the company earns ₹2,00,000 profit and shares all of it, your part = 1% × ₹2,00,000 = ₹2,000
- If the company’s value doubles to ₹20 lakh, each share is worth ₹200 and your 100 shares are worth ₹20,000
- ✓You share in the growth of a real business.
- ✓You get rights: dividends, voting and information.
- ✓Your loss is limited to what you invested; you never owe the company’s debts.
- If the business does badly, your share value falls.
- In bankruptcy, shareholders are paid last, often nothing.
- Shares = part-ownership.
- Ownership % decides your share of profits and value.
- Your maximum loss is what you invested.
- Management runs the company, not individual shareholders.
Q1. A company worth ₹50 lakh has 1 lakh shares. What is one share worth?Show answer
₹50,00,000 ÷ 1,00,000 = ₹50.
Q2. You own 500 of its 1 lakh shares. What % do you own?Show answer
500 ÷ 1,00,000 × 100 = 0.5%.
Q3. If the company goes bankrupt with large debts, do you have to pay its debts?Show answer
No. Shareholders can lose at most what they invested.