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Meaning of Stock

Stock refers to the aggregate amount of fully paid-up shares which can then be broken up into smaller pieces so that they can be transferred to any amount of capital. For this, it is necessary to have some capital of the company in the form of stock. According to the Companies Act, “A company may convert its fully paid-up shares into stocks, provided such right is authorized by the Articles of Association.”

Thus an inventory is a consolidated form of several fully paid-up shares. It is made by mixing several components. Therefore, inventory is that part of capital which is made up of several fully paid-up shares. Like shares, stock has no face value. Therefore, a company’s capital can have any number of stocks and the value of each can be different. No company can issue inventory right from the beginning. The company having share capital has to issue shares first. The company can then convert those shares into inventory. If the Articles of Association of the company authorize it to do so.

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