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Lesson 4. What Is a Stock? > What's a Company Worth? - Pg. 19

What Is a Stock? 19 Dividends When the company makes money, so do you--if you are a shareholder. The portion of a corpora- tion's after-tax earnings that is distributed to stockholders is called a dividend. Companies can cer- tainly lose money too, in which case there would be no dividends. You would not, however, have to pay out any money, although the value of the stock would drop as any company that is losing money is obviously less valuable. Tip When the company makes a profit, the whole profit, or some of it, is divided up among everyone who has a share. These payments are called dividends (divide up--dividends, get it?). Try to buy stock in a company that will continue to make a profit. Assets Anything you own that's valuable is an asset. What's a Company Worth? Determining the value of a company is a little different from valuing tangible goods like cars and houses. In both cases, you would list the real value of the components and the real value of the liabilities, add the whole thing together, and the end sum would be the value of the company. For example, at Widget Inc. you could determine that the current stock of widgets is worth $100, the office equipment and supplies are worth $100, and the building Widget Inc. owns is worth $100. In addition, Widget Inc. owes its suppliers $50 and still has an outstanding mortgage of $50, so you would subtract that $100 total and the end result of $200 would be Widget Inc.'s value or net worth.