Stocks for companies can be evaluated in a variety of ways. You will hear about Technical Analysis (based on past performance and chart patterns), Fundamental Analysis (overall review of company business, competitors, valuations etc), Valuation Analysis (this focuses on valuation numbers, such as stock price in relationship to assets, revenues, earnings, cash flows etc).

I totally reject Technical Analysis and have therefore not addressed it here. Most of what you see below focuses on valuation Analysis and some Fundamental Analysis.

A public company is a company whose stock trades publicly on the recognized stock exchanges. In USA, these exchanges are the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotation (NASDAQ), the American Stock Exchange (AMEX). Each exchange has a set of requirements to be listed. This means that if you start a local cleaners business in a local strip mall, your business cannot be listed, as it will not meet the minimum requirements such as Market Capitalization (Value of Business) and a host of other requirements.

For most people it is immaterial as to on which exchange the stock trades. Historically, only mature companies traded on NYSE as it has more stringent requirements. The newer startups listed on the NASDAQ and as business grew and they became larger companies, they moved to NYSE. However the NASDAQ has grown so well, that many large companies such as Intel, Microsoft, Cisco, etc have seen no need to move to NYSE.

When a public company is in business, the shareholders own the company. Let us take an example of Oracle Corporation, which has a symbol of ORCL and trades on NASDAQ.

ORCL has today approximately 5300 Million shares outstanding. You can get the information on this at the following link.

The number of shares outstanding can be obtained by going to the corporate website, pulling up one of the recent quarterly earnings press release and perusing through that. Alternately, this information can also be obtained by going to one of the financial web sites such as Yahoo. On Yahoo website, once a quote is obtained, if you click on "Financials" and peruse through the tabs, you will be able to find shares outstanding (you will actually see numbers such as "Basic" shares and "Diluted" shares – just use the Basic shares #).

So what does the "number of shares outstanding" means? It means that, that is the number of shares you will have to buy to own the company 100% outright. So for example, if you were rich enough and you went out and bought every single of the 5300 million shares of ORCL, you would own ORCL 100% (the business, the plant, the cash in the company, all the assets of the company and also all the liabilities of the corporation). Once you buy out all the shares, it is no longer a public corporation. It has become a private company owned wholly by the owner of the 5300 million shares in case of ORCL.

Since price of one share of ORCL today is about $12, it would cost you 63.6 billion dollars (5300 times 12) to buy all the 5300 million shares assuming you can buy those all at that price. Generally the demand increases the price. This number of approximately 63 billion is called market capitalization or "Market Cap"

So what we are saying here is that the company is worth 63 billion. So what if instead of 5300 million shares outstanding, ORCL had twice as many shares – 10600 shares. Does it mean ORCL is now suddenly worth 63 billion times two – 126 billion? No, ORCL as a business is worth still 63 billion, but the price per share in that case would be $6 per share and not $12 per share. This is what happens in a stock split. Instead of a one quarter slice of Pizza, you end up getting two slices, each one eighth in size.