Advantages
Ownership of stock confers a large number of privileges. The company is managed on behalf of the shareholders by a Board of Directors, elected at an Annual General Meeting. The shareholders also vote to accept or reject an Annual Report and audited set of accounts. Individual shareholders can sometimes stand for directorships within the company, should a vacancy occur, but this is uncommon.
The shareholders are usually liable for any of the company debts that exceed the company's ability to pay. However, the limit of their liability only extends to the face value of their shareholding. This concept of limited liability largely accounts for the success of this form of business organization.
Ordinary shares entitle the owner to a share in the company's net profit. This is calculated in the following way: the net profit is divided by the total number of owned shares, producing a notional value per share, known as a dividend. The individual's share of the profit is thus the dividend multiplied by the number of shares that they own.
Read more about this topic: Joint-stock Company
Famous quotes containing the word advantages:
“Men hear gladly of the power of blood or race. Every body likes to know that his advantages cannot be attributed to air, soil, sea, or to local wealth, as mines and quarries, nor to laws and traditions, nor to fortune, but to superior brain, as it makes the praise more personal to him.”
—Ralph Waldo Emerson (1803–1882)
“There is no one thoroughly despicable. We cannot descend much lower than an idiot; and an idiot has some advantages over a wise man.”
—William Hazlitt (1778–1830)
“The advantages found in history seem to be of three kinds, as it amuses the fancy, as it improves the understanding, and as it strengthens virtue.”
—David Hume (1711–1776)