We can see an extract of an investing manual called Investing in stocks and shares written by Dr. John White in the URL The writer tries to provide basic information about investing. Hence, what we can see here is a paper full of concepts related to shares (also stocks or equities).

A share, according to the writer, enables its holder to enjoy both a stake in the company’s revenues and in its assets (cash-in-hand, property, company's stock of raw materials and work-in-hand). In addition, it also allows the stockholder to vote at the company’s AGM. Nonetheless, there are in existence some non-voting shares, which normally enjoy more benefits than other shares, but the holder has no vote in the company's decisions. They were created in order to control the voting stock of a company. As a consequence of its poor image they are becoming old fashioned. Most shares have a nominal value, which originally represented the asset value of the company. Once they are sold at a market, its value becomes the market value, which represents both the worth of the assets and the business ability to make money. The total nominal sum of all the issued shares is the issued share capital of the company.

The dividend of a company is the proportion (normally only a part) of its profits that is paid to its owners, the shareholders. The remaining profits are retained to fund internal growth of the company or to serve as a store of 'fat' with which to maintain dividends in lean years. The number of times that a company could have paid its net dividend is the cover of the dividend. E.g.: On one day in January 2003, the cover for the dividend of Great Universal was 1.9 (Financial times).

Company's profits are known as its earnings. When the earnings are divided by the number of shares in existence, we get the 'earnings per share' (EPS). The P/E (price to earnings) ratio measures how many years of earnings per share at the current share price would be needed to pay for the share. Contrary to the fact that not all the earnings are paid as dividends, it is hoped that the earnings and dividends will rise each year, reducing the repayment time of the share price and thereafter all dividends will be pure profit. What is true is that stocks do not have to be held forever, and can be sold at the current going rate, the 'market price'. E.g.: the P/E ratio of Great Universal is 13.7 (Financial times)

Finally, the writer talks about the yield, typically expressed as a net percentage of the current share price. Some long term average yields are 3.6% in the U.K, 2.8% in the USA or 1.0% in Japan. Normally, they are lower than the bonds interest, which are safer. As we can see, the acceptance of a risk does not always guarantee a higher return than a 'safe' investment.

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