SHARES_0204

SHARES

Shares are a part of the social capital in a company. It gives the right to the recipient for the sharing of profits. The shareholders also receive voting rights for certain decisions that the company will take.

The ASSETS are the part of the company which comprises its cash-in-hand, property and the company's stock of raw materials and work-in-hand. The shares are once sold at a market value which represented both the worth of the assets and their ability to make Money (is a form of financing).

Usually the shares have a NOMINAL VALUE; it represents assets of the company. A share also gives holders the ability of decision, because they have the right to vote on decisions to be taken in the company. However there are some shares (called ‘’A’’) that provide the profits and restricts the right of vote. Such shareholders can’t vote. Those types of shares are unpopular. The holders of voting shares are usually rewarded by an increased allocation of stock.

Usually a company will pay only part of its profits as a DIVIDEND. The dividend is the part of the profits distributed to the shareholders. The rest is reinvested in the company, is a form of feedback (finance internal growth of the company).

SHAREHOLDER VALUE:

It depends on how shares are valued:

1) At market price: the price quoted at any given time on stock exchange, which reflects (more or less) how well or badly the company is doing. Is expected to increase dividend income each year to reduce the amortization of the price of each share.

2) Price to earnings (P/E): the shareholders receive a proportion of distributed profits in the form of dividend.

3) Price Yield: the yield is usually expressed as a net percentage, without taxes. Yields in each countries are different, therefore have a high risk. The shareholders who accept risk are more likely to get a higher profit.

Mark = 5

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License