SHARES0109

This text deals with different concepts related with shares. Firstly, it explains that shares, which are also called equities or stocks, give the owner the right to have a share in the company’s dividend and a vote in the annual general meeting (AGM) that varies depending on the size of the investor’s holding. Secondly, the assets of the company are constituted by the available cash the company has, such as land or buildings, and the amount of raw materials and work-in-hand less its liabilities to creditors (borrowings or payments).

Also, the great majority of shares have a nominal value that symbolize the asset value of the company, which means that shares can be sold at a different price from its nominal value, showing the potential income of the business. There are also some non-voting shares represented with the suffix “A” that have the same advantages of other shares except from the right to vote and that consist of providing the control of the business to the family that has started the company. Some of the disadvantages of this type of shares are that they are traded at a lower price and they are becoming old-fashioned.

In addition, the dividend of the business is the part of profit that is paid to shareholders, but the company only gives a part of the profit as a dividend, because the rest is used to finance internal growth of the company and to maintain dividends if the business is in decline. The cover of the dividend is the number of times that a company has paid its net dividend.

The P/E Ratio represents how many years of earning per share (earnings divided by the number of shares) at the current share price would be necessary to pay for the share but not all the profits are paid as dividend so companies hope dividends will rise each year in order to reduce the repayment time of the share price.

Finally, another important concept is the yield, which reflects a net percentage of the current share price and that is different in each country. The yields in each country are lower than the interest in local bonds because bonds are considered to be safer.

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