Stocks and Shares.

I will summarize the introduction of the book “Investing in Stocks & Shares” from Dr John White which talks about some very important aspects about the way businesses have to divide and distribute the profits to their investors. And the rights that concern these investors to decide ( or vote ) on the company strategy.
Chiefly I will start talking about what shares and assets are. A share is a portion the company assets, and in the event that the company has been profitable, there is an economic distribution once or twice a year to the owner of the share, which are usually investors. A larger volume of shares, the greater portion of the assets of the company and the greater the amount of dividends. The assets are the property’s and the cash in hand of the company etc, taking off the liabilities.
We can also talk about the value of the shares and what they mean. The nominal value represents the asset weight of the company. But in the market we use to see an other price per share which is the nominal value plus the ability (or not ) to make money. We can use this formula:

Nominal value + “ability to make money” value = Market value
The sum of all issued shares is the total issued capital of the company, also known as equity or stock
In big familiar companies there were invented the non-voting shares, the holders have no vote and the idea is to give the owner family the total control of the company, however this type of shares are disappearing.
Another fact we can put forward is the dividend which provides the shareholders a proportion of a part of the company profits. The other part is saved by the company and used as internal growth or margin for lean years. The number of times that a company could have paid its net dividend is known as the cover of the dividend.
Dr John White also makes reference to the P/E (price to earnings)ratio which measures how many years of earnings per share at the current share price would be needed to pay for the share. For instance, if the market value per share of “British Airways” is 20 pounds and the EPS (earning per share) are 2 pounds per year, 20/2 =10. The “British Airways” P/E = 10 (years). However, this is not an exact value.
The last point talks about The Yield, which is a net percentage of the current share value, it can be positive or negative depending on the company performance, assets and profitability in the long run. The big payouts come when the investors take a big risk, and with the safe invests the profit’s a are fewer.
Nowadays the value per share of many or maybe all companies have decreased significantly because of the big economic crisis we are involved. We hope the change come soon.

Mark = 7

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