SHARES AND TYPES OF SHARES

Today we will be talking about shares.

You know what many people have really known and get to hear about shares in some aspects but do they really know what shares is and also the types of shared that is in existence or that we really have as an economist.

a variety of different types of shares and securities have been developed to meet the varying needs of companies and the conditions of financial market at different times.

and to go for the the main differences concerning the right of the chair or other security order to share in profit or asset when the company cease to trade, and his right to have some degree of control over the directors by voting and company meetings.

I will start this post today by mention the principal types of security or shares order that we have and this I'm going to mention below.

(1). Ordinary shares:

the first type of shares that we have is ordinary shares. into ordinary shares entitles the holder to one vote per share and to whatever distribution of profits which might be expressed or is Express rather as dividend is recommended by the directors and approved by the voting shareholders.

In practice, the individual shareholders did not seem to value the right to vote very highly and many companies have been able to issue voteless shares.

the authors of these are of course powerless to resist any bills to take over the company.

The bidder has only to acquire control over a majority of the shares which actually carry vote.

(2). Preference shares:

In this type of shares that is the preference shares, these have some degree of preference in the order in which profit are shared.

as a result the amount of dividend is usually fish at a state ID amount usually expressed as a percentage of the nominal or face value of the share.

The voting right of preference shares are normally very limited.

Unless stated otherwise, the right to the agreed dividends are cumulative what do I mean by cumulative? if any amount is on paid at the end of one year it is carried forward to the next year.

This on pay the dividends that I'm talking about must be paid before any share of profit can be distributed to any other class of shareholder.

in practice this right here early as much value because a company which misses dividend for several years will be in such difficulties that the preference shareholders are likely to have to surrender their rights if it is ever to get out of debt.

It is where to see new issues of preferred shares today.

(3). Deferred shares:

this represent devices whereby original founders try to retain control over a company and their ability to profit from expansion made possible by issuing ordinary shares to the public.

Dividends on deferred shares are not payable hunting ordinary shareholders have received and agreed amount of dividend,

but at this point a profitable company could then pay large amounts to a few deferred shareholders who could also have very useful voting rights denied to ordinary shareholders.
Deferred shares are not popular with a modern stock exchange.

(4). Debentures and loan stock:

I'll be talking more about this, in this type they are not necessary shares and loan holders have no right to share in profit.

They are not in any legal sense owners of the Enterprise; they are simply people who have lent money to the company and have received in exchange securities which can be bought and sold on a stock exchange in very much the same way as shares.

In return for lending money this security holders receive interest, not dividend and the interest is payable whether or not the company makes a profit.

From the company's point of view loan interest is an expense and is thus chargeable against taxes.

in effect therefore it cost a company less to borrow money by means of debentures at, says 9% done to issue preferred shares that we'll talk about earlier at number two at, says 8%.

The reason is simple: the 8% payable to shareholders must be paid out of all profit after tax has been paid.

Now the 9% interest is an expense which reduces the company's liability to tax.

there is no difference to the people who is saved interest and dividends for both have to be included in the income on which individual income tax is paid.

as a result debenture or loan stock has largely replaced preference shares when a company wishes to raise money by means of a fixed return type of security.

debenture or low stock is now more popular in our present age than preference shares.

(5). Rights issues:

The last type of shares are we talking about today is the right issues.

Sometimes companies issues additional shares of stock on a favorable basis to existing shareholders.

anyone who does not wish to buy this additional shares can sell his 'rights' to them on the stock exchange.

the value of this light depends on the share price and the special price quoted to rights holders.

If the special price is 2Euro for his share selling in the market for 2.50Euro, the rights could be worth anything up to 50p per share.

A white issue should not be confused with his scrip or bonus issue which is a free issue of shares to existing shareholders without any additional payment.

I'll be stopping here today and I hope you have learnt something and a lot for my post today.

Don't hesitate to drop your view ideas or suggestions in the comments section below.

Thank you.