A share is a slice of a business

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Key idea: A share is a claim on a real company's future profits, so its worth depends on the business, not on the chart.

A stock price moves every second, which makes it easy to treat a share like a lottery ticket. It is not one. A share is a small, legal slice of a real company: its factories, its software, its customers and, above all, the cash it will earn for as long as it exists.

If a company has 100 million shares and you own 100 of them, you own one millionth of the business. When it earns $500 million in a year, your slice of that profit is $500. Whether the company pays it out as a dividend or reinvests it, the money belongs to the owners.

That is the whole idea behind valuation. If you can estimate what a business will earn over time, you can estimate what a slice of it is worth, and then compare that figure with the price the market is asking today.

Over the next 27 days we build that skill one piece at a time: profits, cash, debt, the main valuation methods, the traps, and how to read the numbers on any Equity Rank stock page.

Quick check

A company has 50 million shares and earns $100 million this year. How much of that profit belongs to someone holding 1,000 shares?

See a full worked valuation of Apple →

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Educational content only, not investment advice. Examples use made-up or historical figures.

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