Final answer:
Stock represents ownership in a firm, with each share having a uniform face value indicated on the stock certificates. Companies raise capital through an initial public offering (IPO), and investors earn returns via dividends and capital gains. Large corporations often have a broad shareholder base with no single majority owner.
Step-by-step explanation:
Stock represents firm ownership in a company, and this ownership is expressed through shares. Each share has a uniform face value, which is the amount per share recorded in the company's Capital Stock account, and this value is typically printed on the stock certificates. When a company sells stock to the public, through a process known as an initial public offering (IPO), it receives financial capital which can be used to fund operations, invest in new projects, or expand the business.
After the initial sale, the company does not receive funds directly from the trading of its stock between investors. However, investors who purchase stock can earn a return in two main ways: through dividends, which are direct payments from the firm to its shareholders, and through capital gains, which occur when an investor sells a stock for more than the purchase price.
Large corporations, such as IBM, AT&T, and Microsoft, have millions of shares owned by numerous shareholders, and typically no single investor holds a majority of the stock. This diversification of ownership allows for a wide base of investors each holding a stake in the firm's future and potential profits.