What are shares?

A share gives an investor the right for dividends, a stake in the company's assets, and the right for a vote in the company's annual general meeting.
A company's assets are obtained by deducting the liabilities (what the company owes) from its properties, cash-in-hand, and inventories.
The shares of a company are known as equity or stock. Nominal value is the price at which shares are bought when they are first issued and it represents the asset value. Normally, in the UK, the nominal value is approximately 25p. However, due to potential earnings of the company, these 25p shares may be bought in the market for a higher price. The total nominal sum of the issued shares is the issued share capital.
Non-voting shares (represented by the suffix 'A') are different from the other shares in that they do not give the holder the right to vote in the company's strategy. This is so the founders keep the control of the company. However, they are cheaper, and therefore are becoming old-fashioned and unpopular as they are being changed voting status.
A company gives to its shareholders a part of its profit; this is known as dividends. The rest of the profit is used to finance internal growth or stored to pay dividends when profits fall. The cover of the dividends is the number of times the company could have paid its net dividend.
The company's earnings are the profits. To get the earnings per share (eps) we divide them by the total number of shares. The P/E (price to earnings) ratio tells us the number of years of eps, at the current share price, that would be needed to pay for the share. In addition, as not all the earnings are paid as dividends, more years will be necessary to repay the share price out of dividends. However, the repayment time of the share price will be hopefully reduced and the dividends will become profit, because the earnings and dividends are expected to rise throughout the years. Moreover, the stock can be sold in the market at the current rate, and does not have to be held forever.
The yield is also used to measure the company's performance. It is usually expressed as a net percentage of the current share price. The yield varies throughout different countries; in the UK, for example, the long term average yield is of 3.6 per cent net. The yields are lower than the safer interest that could be obtained by investment in local bonds or through building societies. This is because risk gives more return than a safe investment. The lower return from shares shows us the growth potential of dividend payouts, which are not seen in safe investments.

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