Equity share and Equity Trading- What is the meaning of equity in the stock market, what is equity trading and equity investing, in today’s information we are going to know about this.
What is Equity share and Equity Trading?
Equity means ownership of any business. We know that to buy a part of a company means to buy a small share of that company and in the language of investing this small part is called Equity. So we can say that by buying the share of a company We buy equity in that company.
Let us understand this as an example. Let’s say 5 friends started a company together. The five friends invested 22 crores and started the business with 10 crores, in the legal registration of the company, they divided the company into total 1 crore shares, and everyone decided that all the people in the company would work equally.
Therefore, everyone divided the share of the company equally among themselves, in this way each of the founders got 20-20 lakh shares out of the total 1 crore shares of the company. So friends, 100% ownership or equity of the company is currently with the founder of the company. Whose total value is currently ₹ 10 crores. Because the company has a total of five founders, then everyone will have 20% equity of the company.
Now let’s assume that after some time ₹ 50 lakh was needed to make the company bigger, then all the founders sold the company’s total 50% equity i.e. 50 lakh shares in the IPO and collected a total of ₹ 5 crore from the public. . Now we can see here that the company sold its 50 lakh shares in the IPO which was equal to the total 50% equity of the company. This means, that the company shares 1% of its equity for every one lakh shares in the IPO.
If we buy one lakh shares of this company, then we will buy 1% equity in this company and we will become the owner of 1% of this company, then friends like this there is equity in investing and nothing but this company Indicates ownership. Companies sell their equity to the public by dividing it into shares.
The more shares an investor buys in a company, the more equity he has in the company. This is the reason why stock market is often called equity market, stock investing is called equity investing and stock trading is called equity trading. Always remember that whenever we buy stock of a company, we buy equity in that company.