What are Shares?

Shares are very important for many reasons, firstly, they provide dividends to the investor. They also give said investor a vote in company policy, and a stake in their assets.

The Assets
Assets are the necessary material for a company to run, it includes it’s cash holdings, land, buildings and any other forms of capital it may posses taking away from this it its liabilities.

Nominal Share Value
Every share sold by a company to an investor has a stated face value. The face value is constant, however, its market price will fluctuate for many reasons, most being their current assets, and potential to make money off it. The amount of these shares sold by a company to investors is its stockholders equity.
However, not all share holders have a vote in a company. Certain shares limit participation, but do not take away other benefits. These ‘A’ stocks are often traded at a much cheaper price than ‘regular’ voting stock, however they are also becoming more rare to find. Their original intention was to keep outside influence, such as votes, away from company policy, however this has been severely looked down upon by modern investors.

The Dividend and its Cover
The dividend is the amount of money a company gives to its investors; it is derived from the amount of profits made in the previous year. The dividend is often times only a fraction of its profits since many companies will want extra money in case of tough times. Usually, companies can pay their dividends multiple times over.

P/E Ratio
Profits for a company are often reported as earnings, these earnings, when divided amongst its shareholders, are reported as earning per share. However, many EPS are not given as dividends, since the shares are not paid for. However after holding for a period of time, it can be repaid and given dividends will be profitable, the actions can also be sold at market value.

Yield is another measure of a companies performance, typically after taxes have been removed. Average yield varies from country to country, typically ranging from about 3.5 to 1. Average yield per country is lower than the interests paid through [purchases of bonds and other low yield investments. However, the high yield per share, is a direct result of the high risk involved in trading stock.

Mark = 5

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