Shares0007

The extract taken from ´´Investing in the stocks & shares´´ explains briefly some concepts related to shares.
A share is what the company gives an investor; the owner of this share then has the right to participate in the company’s dividends (once or twice a year) and gives him the right also to vote in the annual general meeting of the company (AGM) in proportion to the size of the investor holding.
Normally shares have a nominal value that represents the assets value of the company. This share can be sold at different prices from nominal value. The total share capital of the company will be represented by the total nominal sum of all the issued shares.
In some companies there are some non-voting shares, this type of shares have the same rights as the other ones except that the holder doesn’t have the right to vote, the original idea of this was to keep the control of the company in the hands of the founders, now days this type of shares are not popular and they are sold at low prices.
The dividends are a part of the company’s profit which is paid to the shareholders. Normally what the company would do is pay part of the profit and the rest it will be retained to increase the reserve of the company and used for internal growth and also it can be used to maintain dividends in lean years.
The P/E (price to earnings) ratio measures how many years of earnings per share at the current share price would be necessary to pay for the share. Not all earnings are paid as dividends. So in the future years they will need to repay them.
Another concept related to shares is the yield. The yield is the net percentage of the current share prices. Yields are usually lower than the interest as local bonds are considered to be safer.

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