Shares_2022

The text proposed is an extract from Dr John White´s book called “Investing in stocks and shares”and talks about economic terms, specially the ones related to shares and investments. The functions of shares are defined here as the money returned to shareholders in form of dividends and the possibility for them to vote and take part on the company´s properties, always according to what was decided on the annual general meeting (AGM).
Assets are also explained as the goods that the company have such as cash, propeties and stocks, less its liabilities like borrowings or payments to creditors. The text then talks about the nominal share value (in general 25p) wich is the estimation of the company´s assets. The total of the nominal sum of all the shares is called the issued share capital of the company. It is important to note that there are some non-voting shares for certain companies ( “A” shares) which function is to keep the company´s control by the people who founded it. Though, this have a disadvantage which is the unpopular feeling for major investors.
Another economic term that appears is the dividend and its cover. The dividend is defined as the proportion of the company´s profits wich goes to the shareholders. The amount of money that the company don´t pay as dividends is used for their growth and for possible situations of economic decline. The cover of the dividend is the number of times that a company could have paid its net dividend.
Knowing that the profits of the company are also called it´s earnings and this ones divided by the total of shares are the “earnings per share”, the P/E ratio can be explained like the ratio which measures how many years of earnings per share at the current share price would de needed to pay for the share. But not always earnings are paid as dividends as they may be used to repay the share price.
Finally, we talk about the yield which expressed as a net percentage of the current share price, measures the activity of the company. Here is an interesting fact, because eventhough the risk taken in investing sometimes implies more return, in countries yields use to be lower than the interest invested in local bonds or in the local equivalent of a building society.

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