Question about Corporations?

Question

I don't get it. How do they work? Owning stock is owning part of the corporation.

But how do you profit from it?

Do you profit from selling your stock because its worth more and this system keeps going over and over?

Or do you profit every year partially from it making money?

If so, how does the corporation continually make money?

When does it pay the people?

Answer 1

Yes, owning stock is owning part of a corporation.  Large public companies have many, many stockholders.  Individual stockholders own minuscule percentages of those companies.

Companies, of course, try to make money by engaging in business.  (Coca Cola sells soft drinks; Ford sells cars, etc).  They then make money.  They have expenses too, like salary and the cost of raw materials.

They (hopefully) profit.  When the company profits, its stock increases in value and a stockholder could sell it for more than he bought it for.  Also, companies, sometimes pay what are called dividends.  Dividends are a means for a company to distribute profits to shareholders.  That could happen at any time, but typically happens annually for those companies that pay them.  So, for example, a company that earned profits might choose to pay dividends in the amount of $.05 per share and retain other earning to invest in the business and try to make more money.