The extract taken from Dr.John White on “Investing in stocks & shares” is a briefly explanation of some basic concepts:

Firstly it describes a share as the right for the investor to receive a share of the company dividend proportional to the size of his holding, as well as a stake on the company’s assets (property, land, cash and stock of raw materials less its liabilities) and a vote.
It refers to the nominal share value, which represents the original asset value o f the company(usually around 25p) when a share, also called equity or stock is sold at a market value reflects the earning potential of the company; the ability to make money.
There are different types of shares, the ones usually designed with the suffix A, are shares that enjoy the benefits of others shares except of the right to vote in the company’s strategy, due to this disadvantage are trade at a lower price and are less popular than the voting stock.

The dividend is the proportion of a company’s profit paid to the owners, the stockholders, the rest of the profits are retained as funds for developing the growth of the company or as a prevention to maintain dividends in less profitable periods. The “cover” of the dividend is how many times the company could have paid the dividend if it haven’t retained anything for the future.

In addition it explains the relation between earnings and P/E Ratio; the company profits are known as its earnings, the result of dividing it by the number of shares is the “earnings per share”(eps). The price to earnings ratio P/E measures how many years of earnings per share at the current price represent the price of the share.
The last measure of a company’s performance exposed is its yield: expressed as the net percentage of the current share price, is usually lower than the interest obtained in a less risky investment such as local bonds…due to lower return is compensated by the potential dividends paid.

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