Corporations sell stocks primarily to raise funds to launch a new business or expand an existing one. When purchasing a share of stock, you are buying a proportional share of the company’s profits or losses. A simple example would be to imagine that you need to raise one hundred dollars to start a lemonade stand, so you sell one hundred shares for one dollar a piece. Now, each person has a one percent stake in your company. If you, in turn, sell one thousand dollars worth of lemonade, each person would get a ten-dollar return. On the other hand, if your lemonade stand is struck by lightning and burns to the ground before ever selling a glass, all of your share holders would lose their original investment of one dollar.
Talk to a financial planner for more information.