Although shares and stocks sound similar in most contexts and have been always misinterpreted, however, there are some key differences between stocks and shares. In this article, we will understand the difference between stocks and shares.
But before we go ahead let us understand the basic meaning and definition of shares and stocks.
Shares and Stocks Meaning:
The shares (Equity shares) can be understood as the financial security which is utilized by the companies to raise long term funds from the general investors. The companies issue their equity shares in the capital market (stock market) so that the general public shall be able to buy the shares of the particular company with a motive to earn dividend as well as capital gain due to appreciation in the share price.
The share refers to the smallest unit of the company’s capital which possesses the rights of ownership in a certain proportion in the company. The shareholders who own the shares of a particular company have rights to get some portion of the company’s profit (i.e. dividend) as well as assets.
The shares of a company are traded publicly in the stock exchanges (NSE, BSE) among different investors. If anyone purchases a share of any company, he buys the rights of ownership in the company’s assets as well as profit share. The shares can be classified into two categories viz, Common (Ordinary) Shares and Preference Shares.
On the other hand, the stocks of a company can be defined as per the Companies Act, 2013, refers to the collection of shares of a member, converted into a single fund which can be fully paid up.
In other words, stocks are the collection (aggregation) of shares of one or multiple companies as fully paid up funds. Thus we can say that share refers to the smallest unit of stock which is a single fund.
Any company can convert its shares into stocks which are fully paid up as per the Companies Act, 2013 with the following conditions.
- Such conversion must be specified in the company’s Article of Association (AOA)
- The company should pass a resolution in the Annual General Meeting (AGM) regarding such conversion.
- The Registrar of Companies (ROC) should be notified by the company about such conversion of shares.
Now let’s discuss head to head difference between stock and share in brief.
Stocks vs Shares (Comparison Chart):
|BASIS OF COMPARISON||SHARES||STOCKS|
|Meaning||A share refers to the smallest unit of the company's capital which possesses the rights of ownership in a certain proportion in the company.||The stocks of a company can be defined as the collection of shares of a member, converted into a single fund which can be fully paid up.|
|Fresh issues||Fresh issue is possible||Not Possible|
|Fraction||Not possible||can be bifurcated|
|Paid up Value||May or may not fully paid up||Always fully paid up|
|Numeric Value||Always have numeric value||Don't have such value|
|Nominal Value||Some nominal value associated with share exists.||There does not exist a nominal value.|
|Denomination||Two different shares of same company have equal value.||Two separate stocks of same company may or may not have same value.|
Difference between Stocks and Shares:
- The shares are the smallest unit of the entire share capital of the company representing the ownership whereas the stocks are the collection of shares of one or multiple companies.
- The shares can be fresh issues, however fresh issue of stock is not possible.
- The shares may be fully or partially paid up but stocks are always paid up.
- Being the smallest unit of the share capital of a company, share can’t be further bifurcated on the other hand, stocks can be bifurcated further.
- The two separate shares of a company have the same value whereas the stock’s value of the same company may or may not be the same.
- Each share has a definite numerical value known as Distinctive Number, while stock doesn’t have such a numeric number.
- There is always a nominal value related to sharing but the stocks don’t have such nominal value.
Hope the above article would be able to clarify the difference between shares and stock. In a nutshell, a share referred to the security is a fractional and smallest unit of the capital of any company which are issued to raise funds from the general public, stocks, on the other hand, is a bunch (aggregation) of such shares which are fully paid up, however, there is no difference between ownership claim of shareholders/ stockholders in the company.