The differences between stocks and shares

These two concepts of economics are fundamental to understanding how companies operate.

The global market, transnational companies and the banking system offer the possibility of selling or buying stocks and shares to interested parties. However, we live in a society alien to these terms; we hear them every day but are unable to detect or explain what they consist of.

In this article we will see precisely what is the difference between shares and participations..

The differences between shares and participations

In the general context of globalization and the finance associated with the stock market flotationIn the general framework of globalization and finance associated with the IPO, in which money flows and the economy has more and more ways of transforming reality, organizations can issue stocks and shares to finance themselves. Let's see how they work and what their differences are.

What are shares?

Shares in a company are the parts into which the initial capital of a company is divided. of a company. That is to say, if the capital of 300,000 euros is paid in by ten people, they each have a value of 30,000 euros. In this way, the individuals who contribute liquidity for an economic activity will be called shareholders.

These shareholders are the ones who will have a decisive vote in the measures taken by the company, the strategy to be followed, the organizational model or the infrastructure it may have. In addition, the shares are the ones that enhance the growth of this capital. The more money we have, the more movement we can have in the financial market..

Stocks are those that give direct benefit to their owners, always depending on the profits or losses that may be incurred. These shares can also be sold at a different price from what they were bought for. This means that if we contribute, for example, 300 euros in shares and the price of that share is rising, it can be sold for 500 euros, if that is the case.

In short, the shares determine the power of influence that one has over the company that has been created, and this influence is measured in percentages that will determine the degree of importance or weight that one has over the company that has been created. determine the degree of importance or weight that our voice can have in the organization.. Capital is transformed into influence in decision making according to the percentage of shares issued by the entity.

Shareholdings

And what are participations in the economy? In this case participations are clearly differentiated from one thing with the shares.The company does not have the power to influence any type of executive, administrative or economic decision on the activity in the company or organization where these attributes are possessed.

Simply, the contributor contributes a certain amountThe holder of the shares will benefit from the benefits of the contribution. The holder of the shares will benefit from an annual sum of money that will compensate his investment. Regardless of whether the company in question turns out to be profitable or loss-making, the return on the participations will be fixed and annual. A balance sheet will be drawn up at the end of the financial year after twelve months.

Another distinguishing feature between shares and participations is that the latter are, in principle, of a perpetual nature. That is, you have to negotiate with the manager or CEO of the company in case you want to terminate a shareholding contract, and both parties must be in mutual consent.

Who can be a shareholder or hold shares?

Very often one tends to think that only expert minds in economics have the opportunity to develop an activity of such caliber. However, However, any person or individual of a legal nature is entitled to obtain shares or be an occasional shareholder. occasional shareholder. It is recommended, for the user's peace of mind, to consult and be correctly informed for a business praxis.

According to the latest reports and research by economists and professors specializing in the stock market, there is a worrying legal ignorance among people entering the world of finance. Their rights are often ignored, given the complexity and degree of interpretation subject to the conditions in participations and shares.

Bibliographical references:

• Becker, Gary S. (1976). The Economic Approach to Human Behavior.
• Economics, second edition (2009), with Robin Wells.
• Friedman, David D. (2002). "Crime," The Concise Encyclopedia of Economics.