Disadvantages of Defined Contribution Pension Plans
Defined contribution plans have come under a lot of criticism because of the various disadvantages that they have. Many of these plans have been viewed as a covert way to absolve the government of any responsibility related to the retirement of its citizens. Given the many other socio-economic factors which are at play, defined contribution […]
Junk Bonds in Investment Banking
Investment bankers help their clients raise money by selling equity as well as bond securities on the securities markets. Investors know that equity securities are risky by their very design. However, when investors think about debt, they often think about secure investments, which are almost certain to pay a fixed rate of return. Debt is […]
Testing the Financial Model
The creation of a financial model is like a project which has to be undertaken by the company. This means that just like any other project, testing the functioning of the financial model should ideally be included in the project. However, in most cases, testing the financial model is generally the last phase of the […]
Why do Retail Restructurings Fail?
The retail sector has been under significant financial distress in the recent past. An alarmingly large number of retail companies are facing bankruptcy proceedings in courts across the world. However, it needs to be understood that bankruptcy proceedings and liquidations are not a preferred solution for creditors either. Before creditors initiate bankruptcy, they generally try […]
Why are Investors Getting Spooked by an Inverted Yield Curve?
In the past week, the American investors witnessed an inverted yield curve for the first time since the year 2007. An inverted yield curve is one of the most tell-tale signs that a recession is around the corner. This is the reason why the sighting of the yield curve sent both the equity as well […]
An organization in order to raise money divides its entire capital into small units of equal value. Each unit is called a share.
A share is nothing but an indivisible unit of a company’s capital to be sold among individuals to increase profit of the organization.
An individual owning one or more than one share of an organization is called a shareholder. In simpler words, an individual purchasing one or more than one share from any private or public organization is called a shareholder.
Why do people invest in shares ?
An organization pays the shareholders for investing in their company’s shares. The income earned by an individual by investing in an organization’s share (private or public) is called as dividend.
What is Retained Earnings ?
The profit earned by an organization is put into use in the following two ways:
What is a Share Certificate ?
When an individual purchases shares from any organization, he/she is issued a certificate as a proof of his investment. Such a certificate issued by an organization to the shareholders is called a share certificate.
Equity shares also called as ordinary shares are the shares where the payment of dividend is directly proportional to the profits earned by the organization. Higher the profits earned, higher the dividend, lower the profits, and lower the dividend. In an equity share, dividends are paid at a fluctuating/floating rate.
Shares which enjoy preference over payment of dividends are called preference shares. Shareholders enjoy fixed rate of dividends in case of preference shares.
Shares held by the management or founders of the organization are called as founder shares.
Bonus shares are often issued to the shareholders when the organization earns surplus profits. The company officials may decide to pay the extra profits to the shareholders either as cash (dividend) or issue a bonus share to them.
Bonus shares are often issued by organizations to the shareholders free of charge as a gift in proportion to their existing shares with the organization.
How to buy shares ?
A stock market is a platform for trading of company’s shares at an agreed rate.
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