The investor interested in equity securities should first have a firm
understanding of what equity is. Equity can be defined as ownership of, or
investment in, property. Property may include such things as art, race horses,
computer chips, lumber, automobiles or just about anything to which legal
ownership may be demonstrated.
There are three basic types of equity: common
shares, preferred shares and warrants.
Equity is viewed by the market as an ownership "share" in the
revenue stream of a corporation's income once all prior obligations and debts
have been satisfied. The "share" price is the relative value given to
the corporations earning potential based on a number of factors. These include
general economic conditions, both in the industry and in the overall economy,
earnings projection, projected corporate growth, corporate
stage of development, and financial ratio analysis.
The overall analysis of a firm's future earning potential must be done through
both fundamental and technical
analysis, including charting and other indicators.
Generally, the structure of equity is that a "share" of the
corporation represents the current market value of the firm, secondary to this
is the potential for dividend income. There are various classes of equity for
the individual investor to consider. The primary three groups into which equity
may be subdivided are common stock, preferred shares, and warrants. |