Concept and Features of Stock and Shares

When a company needs money to run and grow its business, it raises that money — its capital — by inviting the public to contribute. The total capital is broken into a large number of small, equal units so that even a person of modest means can contribute; each such unit is called a share. A person who buys shares becomes a part-owner (a shareholder) of the company, in proportion to the number of shares held. The Odisha CHSE Std-11 Business Mathematics and Statistics syllabus studies the arithmetic of these securities — how to compute dividend, income, cost of investment and yield — drawing on the same commercial-arithmetic and financial-mathematics principles used in any standard treatment of investments.

Share. A share is the smallest unit into which the capital of a company is divided. Each share has a fixed amount printed on it, called its nominal value (also face value or par value) — commonly ₹10 or ₹100. A shareholder earns a return called a dividend, which is a share of the company's profit and is not fixed — it rises and falls with the company's performance.

Stock. In business mathematics, stock refers to a fixed-income security — government stock, a bond, or a debenture — that is issued in bulk and quoted per ₹100 of nominal value rather than in individually numbered units. Stock carries a fixed rate of interest (e.g. "9% stock"), and unlike a share it can be bought or sold in any fractional amount of nominal value (₹73 of stock, ₹146.50 of stock, and so on). A ₹100 unit of nominal stock is the standard reference used in every stock calculation.

Key features common to both:

• Each carries a nominal (face) value — the value fixed at the time of issue and printed on the certificate.
• Each is traded in the market at a market value (market price), which may be more, less than, or equal to the face value depending on demand.
• Each provides a periodic return — a variable dividend on a share, a fixed rate of interest on stock.
• Both can be freely bought and sold in the stock market, usually through a broker who charges brokerage (a small fee) on the transaction.

The whole of this chapter is built on one simple idea kept absolutely straight throughout: the return (dividend or interest) is always reckoned on the nominal value, while the amount actually invested is reckoned on the market value — mixing the two up is the single most common source of error, and §5 and §6 return to it repeatedly.