Shares2323

sha In this page http://www.howtobooks.co.uk/family/stock-shares/ the author writes about “what are shares” and other questions related to it.

What is a share? A share represent a part of a company's net assets. Net assets are the net "value" of a company, that is, the difference between the assets (what the company has and owns: property, cash, rigths to receive and collect money) and the liabilities (what the company owes to banks, suppliers and other creditors). Owners of the shares are called shareholders and they have rights to vote and to get dividends (explained below)

Shares have a nominal value which reflects the original value or net assets of the company (divided by the number of shares). So, the sum of the nominal value of all the shares is the "issued" capital (also called equity or stock). Whan shares are purchased and sold they have a market price or market value. This value can be more or less than the nominal value depending on the value of the assets and the poytential to generate earnings (profits). The sum of the market price or value of all the shares is the market value of the company.

The normal shares give to the shareholders rights to vote and take decisions. But there may be shares without those rights. They are called non-voting shares.

Companies generates profits or earnings. They pay part of those profits to shareholders and that is called dividend. The rest of profits go to reserves. The ratio earnigs/dividends is called cover (number of times taht dividend can be paid).

Other important ratio is P/E which is the ratio market value divided by earnings.

Finally, the yield is the percentage the net earnings represent over the market value or price (earnings/market value *100)

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