FIN 101 · Market Fundamentals · Lesson 1 of 4
What Is a Stock?
Ownership, exchanges, and why prices move.
Learning objectives
- Define a share and explain what ownership entitles you to
- Compute market capitalization and use it to judge how meaningful a price move is
- Distinguish capital gains from dividends within total return
In this lesson
Ownership in a company
A stock (also called a share or equity) represents fractional ownership in a company. When you buy one share of Apple (AAPL), you own a tiny piece of Apple Inc. — its profits, its assets, and its future growth.
Companies issue stock to raise capital. Instead of borrowing from a bank, they sell pieces of ownership to the public through an IPO (Initial Public Offering). Once issued, shares trade on exchanges between buyers and sellers.
If Apple has 15 billion shares outstanding and you own 100 shares, you own 0.0000007% of the company. Small — but still real ownership.
How you make money
There are two ways to profit from stocks:
Capital gains — Buy at $100, sell at $150 = $50 profit per share. This is the core mechanic in StockPrince challenges.
Dividends — Some companies pay quarterly cash to shareholders. Dividend stocks tend to be more stable (think JNJ, KO) but grow slower.
Why prices move
Stock prices move based on supply and demand. More buyers than sellers → price goes up. More sellers than buyers → price goes down.
What drives that demand? Earnings reports, news, economic data, analyst upgrades/downgrades, sector trends, and raw sentiment.
Price over time
In StockPrince challenges, you don't need a stock to go up — you need it to outperform the other players' picks. Relative performance is what matters.
Key terms
Ticker symbol — The abbreviation used to identify a stock (AAPL, TSLA, NVDA).
Market cap — Total value of all shares outstanding. Price × Shares = Market Cap.
Shares outstanding — How many shares exist for a company.
Float — The number of shares available for public trading (excludes insider-held shares).
The role of exchanges
Stocks trade on exchanges — regulated marketplaces where buyers and sellers meet. The two biggest in the US:
NYSE (New York Stock Exchange) — The oldest and largest. Many blue-chip companies list here (JPM, WMT, DIS). Known for its physical trading floor on Wall Street.
NASDAQ — Fully electronic. Home to most tech companies (AAPL, MSFT, NVDA, AMZN). Tends to attract growth-oriented companies.
Trading hours are 9:30 AM – 4:00 PM Eastern, Monday–Friday. Pre-market (4–9:30 AM) and after-hours (4–8 PM) trading also exists but with lower volume and wider spreads.
In StockPrince, challenge start/end times align with market hours. Knowing when markets open and close helps you time your entries.
Concept
A company's total equity value is simply the price of one share multiplied by how many shares exist. This single number sets the context for everything else.
Market capitalization
- Price
- current market price of one share
- Shares Outstanding
- total number of shares issued by the company
In the market
A $2B company can swing 5% on ordinary volume, but a $500B company moving 5% erases ~$25B and almost always signals real news. Size tells you how to read a move.
Concept
Your return is not just the change in price — cash dividends count too. Over long horizons, reinvested dividends have historically made up a large share of total equity returns.
Total return
- P_start
- price when you bought
- P_end
- price when you sold
- Dividends
- cash paid per share during the holding period
In the market
Contests reward relative total performance, so a steady dividend payer that holds its price can still beat a flat non-payer.
Key takeaways
- A share is fractional ownership — a claim on a company's assets, profits, and growth.
- Prices move on supply and demand; earnings and news act through that channel.
- Market cap = price × shares, and it frames how significant any % move really is.
- In contests, beating the field — relative performance — is what scores.
Scenario 1 of 3
+15 XPA company with 1 billion shares outstanding is trading at $50 per share. They announce a 2-for-1 stock split.
After the split, what happens?
Scenario 2 of 3
+15 XPCompany XYZ announces it will buy back $10 billion of its own stock over the next year. It currently has a $200B market cap and 2 billion shares outstanding.
How does this buyback likely affect the stock price?
Scenario 3 of 3
+15 XPYou're looking at two companies. Company A has a market cap of $500B and Company B has a market cap of $2B. Both dropped 5% today.
Which drop is more significant and why?
Knowledge check
+50 XP1. What does a stock represent?
2. What primarily drives stock price movement?
3. What is market capitalization?
Apply what you learned
Enter a free challenge and pick your first stocks
Further reading
- 1.Stocks for the Long Run — Jeremy J. Siegel, 2014. Long-run equity returns and the outsized role of reinvested dividends.
- 2.A Random Walk Down Wall Street — Burton G. Malkiel, 2023. How public information gets reflected in prices.