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What is a Stock?

Ok so I realize you all want me to give you that one big stock tip that is going to make you rich, fast and have you living on easy street, I would have said on Carribean Island, but St. Croix not looking pretty at the moment. (Hurricane Maria).  Anyways lets get to it:

What is a Stock?

A stock is the the percentage of ownership you have in a company, if you own part of a company then you have taken stock in it.  Cattle are stock, Sheep are stock and Chickens are stock if you have a farm then you take stock in the fact that these commodities will bare you fruit.

So we are going to start a scenario with 5 people, because I love my friends I will use their names.

Ana Lisa

Those didn't make it well respond more often on my Facebook Page, anyways:

These 5 people are forming a company to make widgets (classic term for item in business school).

They each invest $200.00 for 1 share of stock in the new company, each "Shareholder" owns 1/5th of the Company.

So they place $250 aside to run business (staff office etc.)  and $750 to make widgets.  The year passes, they make $11,000 off the widgets.

The company made a profit  ($11,000 - $1,000) = $10,000 there were 5 "Shareholders each having 1 share of stock.  So divide by 5 each Shareholder now owns 1 share of stock that is worth $2,000  not bad on an initial $200 investment.

So next year, they spend $2,500 aside for business expenses (new staff etc) and spend &7,500 to make widgets.  The following year they have a profit of $110,000 -$10,000 = $100,000 Each person now has 1 share of stock worth = $200,000

See how it works?


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