What is a stock? A stock is a small stake in a company. But what does that really mean? First Principles Thinking Elon Musk recently popularised the term first principle thinking which in layman’s terms refers to questioning assumptions until you get down to the bare bones of the matter. This can apply to defining a stock too. A stock represents part-ownership of a company. But what does being a part-owner of a company mean? Let’s dig deeper. As a  part-owner of a company, you are entitled to receive dividends from the company. The company can choose to pay dividends to shareholders when there is excess cash on the balance sheet. As such, we can say that if you own a stock, you are entitled to a stream of future cash based on the profitability of the company. This is one of the main reasons investors buy stock in a company. But that’s not all....