What and Why of Shares?

Shares are also known as stocks or equities; represent ownership interest of shareholders in a company. But why do people want to sell a part of their company? So if you start your own business, initially you can use your savings or can use your family or friend’s funds. In the long run, when you want to expand or diversify, you will have to raise funds either through equity or debt. The trade off between debt and equity confounds many but both the options give you money for investment, expense covering, acquisition etc.

Generally, it is cheaper to issue shares than debt (bonds/loans) because of the fixed payments (interest) that come along with debt but remember you do need to give dividends (only on profits) to your shareholders!