Shares 4991

This text is made up with extracts of Dr John White book named "Investing in Stocks & Shares". It is like a juxtaposition of definitions found in the book, of the 6 most importants concepts you have to know in terms of stock and shares. In brief it explains the meaning of "a share"," assets", "nominal share value", "dividend and its cover", "P/E ratio", and "yield". Those concepts are the most important measures to know the company's performance.
Basically a share in a company gives to his owner the right to vote at the annual general meeting and to receive part of the dividend of the company. There is also some non-voting shares created to enable control of the company to be retained in the hands of the founding family. But they are less popular.
To understand the financial situation of a company, you can have a look on its assets. The assets are all the active parts of the company like cash-in-hand, property and the company's stock of raw materials and work-in-hand. The rest is included in liabilities (debts).
But coming back to shares, it is important to know what is its nominal value. The Nominal Share Value is the price of the share: when a share is put on the market for the first time this value used to be 25p. The total of the nominal sum of all the issued shares is the issued share capital of the company.
The shares allow its owners to receive a payment, which is part of the dividend. The Dividend of a company is the part of its profits which is dedicated to pay the shareholders. The cover of the dividend is the number of times the company could have paid the dividend with its profit.
Before explaining what is the P/E Ratio, we have to know what is an eps. An eps is an earning per share, in other words, it is the profit divided by the number of shares. The P/E Ratio is the price to earnings, it measures how many years of eps at the current share price would be needed to pay for the share.
The last important concept is the Yield. It is a net percentage of the of the current share price which shows the company's performance. The yields are usually lower than the interest, even if this one is safer and should entitle a lower return than from a risked investment. The reason is because the growth potential of dividend payouts is not usually seen with safe investments.

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