What Is a Company?
A company is an organisation that provides products or services, usually with the aim of earning money.
Big and small
Companies can be very small — a single shop — or extremely large, employing thousands of people.
How a company makes money
A company has revenue from sales, and also has costs. The difference can contribute to profit.
What companies use money for
Companies may use money to buy equipment, employ people, develop products, open stores, and expand into new areas.
Owning a piece of a company
Some companies allow people to own a small part of the company through shares — that's exactly what the next lesson covers.
A company's value can change
A company's value can change depending on how people view its future prospects, and many other factors. A successful company doesn't always have a rising value — plenty of things affect it.
Blake's Bike Shop
Imagine "Blake's Bike Shop." What does it sell, what costs would it have, how could it make money, and what could make it more valuable?
It might sell bikes and repairs. Costs could include bikes/parts, rent, and staff wages. It makes money by selling bikes and services for more than they cost. It could become more valuable by growing sales, building a strong reputation, or opening more stores.
Use businesses your child already knows. The goal here is understanding what sits behind a company before moving on to shares.
Where to next
More on investing and why people do it.