As you can see from the chart to the left, Merck has outperformed the market over the past four years. It should be obvious that the company has developed competitive advantages. Superior innovation at both the product and process level as well as other functional developments have enabled the company to grow. As previously established, business activities can be grouped into three activities. For review, they are financing, investing and operating.
Owners provide funds to the company in exchange for an ownership interest.
If you choose to operate your business as a corporation, shares of common stock represent the ownership interest and the owners are known as shareholders or stockholders. We will limit our discussion of business ownership to the corporate form of business. Once owners contribute funds to a business, they are committed. That is to say an owner cannot instruct the company to write a check for the amount invested. The company has no obligation to distribute monies to the owners unless the company chooses to.