• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Ordinary (Equity) Shares.

Extracts from this document...

Introduction

Ordinary (Equity) Shares These are the most commonly issued class of share which carry the main risks and rewards of the business: the risk are of losing part or all of the value of the shares if the business loses money or becomes insolvent; the rewards are that they take a share of the profits - in the form of dividends - and debenture interest, taxation and after preference dividends (if any). When a company makes large profits, it will have the ability to pay higher dividends to the ordinary shareholders; when losses are made, the ordinary shareholders may recieve no dividend. Companies rarely pay out all of their profits in the form of dividends; most retain some profits as reserves. ...read more.

Middle

Their dividends are paid in preference to those of ordinary shareholders: but they are only paid if the company makes profits. In the event of the company ceasing to trade, the preference shareholders will also receive repayment of capital before ordinary shareholders. Preference shares do not normally carry voting rights. Nominal and market values of shares Each share has a nominal value - or face value - which is entered in the accounts. Shares may be issued with nominal values of 5p, 10p, 25p, 50p or �1, or indeed for any amount. Thus a company with an authorised share capital of �100,000might state in its Memorandum of Association that this is divided up into: 100,000 Ordinary shares of 50p each �50,000 50,000 ten percent preference shares of �1 each �50,000 �100,000 The nomainal value usually bears little relationship to the market value. ...read more.

Conclusion

The issue price is either at Pr ( ie nominal value), or above nominal value. In latter case, the amount of the difference between issue pric and nominal value is known as share premium for example - nominal value �1.00; issue price �1.50; therefore share premium is 50p per share. Loans and debentures. In addition to money provided by share holders, who are the owners of the company, further funds can be obtained by borrowing in the form of loans or debentures: Loans are monies borrowed by companies from lenders - such as banks - on a medium or long-term basis. Generally repayments are made throughtout the period of the loan, but can often be tailored to suit the needs of the borrower. Invariably lenders require security for loans so that, if the loan is not repaid, the lender has an asset - such as property - that can be sold. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Mergers and acquisitions can be value creators or value destroyers

    Thus they can be heavily regulated, requiring, for example, approval in the US by both the Federal Trade Commission and the Department of Justice. Recently there has been real boom in mergers and acquisitions activity across several different companies. For example in Telecoms, Alcatel / Lucent and Telefonica / 02 mergers.

  2. Business Studies - Shares

    465.5 BSkyB 5.215 3,400 271 237 Tesco 2.758 7,200 619 420 Abbey National 5.710 2,102 BSkyB � 17,731.00 Tesco � 19,854.00 Abby National � 12,002.42 � 49,587.42 Left over cash from 13 Sept � 0.62 � 49,588.04 This shows us that in our first week of the project we have unsuccessfully lost �412.58.

  1. Are dividends and share repurchases substitutes?

    How do stock markets react to both ways of paying shareholders? 4. What is the relevance of the choice of payout method for managers? These sub-aspects will then allow a more structured approach to the main problem statement. The article will be organized as follows.

  2. What Really Determine the Payment Methodsin M&A Deals.

    Fishman (1989) runs a model of pre-emptive bidding to exam the asymmetric information hypothesis. His findings indicate that cash offers in M&A deals convey positive information about the valuation of the bidder's asset. In this regard, target management is more likely to reject a share exchange or potential competitors (if there exists more than one bidder in a contested bid)

  1. Peacocks - case study

    This contains the company name, the main business address, what the business will produce, a statement of limited liability of the members, and lastly the number and face value of shares to be sold. Articles of association This sets out the rules for running the company.

  2. Applied Business. Investigating a business Preston Manor High School

    needs staff with excellent leadership skills so the school has the staff with ability to achieve the aims and objectives with their use of leadership skills. Plus, the effort of the staff (including the head of departments) reflects on the results of the student every year.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work