I have been studying natural remedies for disease prevention for over 20 years and working as a financial consultant since 1990
Posts Tagged ‘Equity’
Financial Investing 15 – Understand Equity Market – Common Stocks
Posted by admin in Common Stock on November 18th, 2009
As we mentioned in previous article, a company can sell shares to raise capital A shareholder invests in the company and gains a degree of ownership, plus income. The total amount paid for the company shares is the shareholder equity. The main equity market instruments are common and preferred shares. In this article, we will discuss the common stock of a company.
Common Stock purchases may be issued on the following basis:
1. Voting Shares:
It gives the shareholder with the right to vote on important company issues, including attending the annual meeting and to vote on Board of Directors elections.
2. Non-Voting Shares:
Share holders of the company do not have the right to vote on company issues.
Shares after the initial offering (IPO) are resold in the secondary market either through the listed or unlisted common share market. The unlisted market is called the over-the-counter share market and the listed market is called the stock exchange.
a) Dividends
Dividends are a portion of the company’s profits and paid on a per share basic quarterly, semi-annually, annually or whenever the corporation decides.
b) Earning per share
Earning per share is calculated by dividing the amount of earnings by the number of share outstanding. The amount of the dividend paid per share is only a portion of the overall profit as the company will need to retain some portion of that profit for future expansion and operation.
c) Growth
The value of shares is determined by the amount of buying and selling of the shares in the market. The goal is capital appreciation gained by price increases. Capital growth is the priority objective of the equity markets.
d) Risk
All common shares are are exposed to the following risks
Systemic and unsystemic risks as well as poor liquidity can result if low market activity is experienced.
e) Taxation
Any appreciation would be taxed on a capital gains basis and your losses would provide write-offs against gains. Any dividends paid to the investor are taxed on a gross-up basis with an accompanying dividend tax credit.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://financialinvesting14.blogspot.com/
http://financialinvesting15.blogspot.com/
All rights reserved. Any reproducing of this article must have all the links intact.
Preferred Stock Is Excluded From Stockholders Equity Because It Is A Hybrid Security And Does Not Have Full Vo?
Posted by admin in Preferred Stock on November 5th, 2009
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Financial Investing 14 – Understand Equity Market and Preferred Stock
Posted by admin in Preferred Stock on October 21st, 2009
Preferred stock also represents ownership of a company. They generally do not have voting rights, their dividends tend to be fixed and have a higher payment priority than common shares.
1. Types of preferred stocks
a) Participating preferred stock
b) Non participating stock
Preferred stock can also be issued on an accumulative or non-accumulative basis and can be callable or retractable.
2. Dividends
Dividends are paid at a fixed rate based on company earnings. Preferred share dividends must be paid prior to common share dividends. The company also has the right to omit or defer the payment of the dividend. This provides preferred shares with a lower risk element than common shares. The prospectus published by the company and provided to the purchaser, outlines all the details and rights of each particular share issue.
3. Risks
Holders of preferred shares are exposed to the following risks:
a) Systemic and unsystematic risks.
b) Liquidity risks due to low market activity.
c) Dividend payment risk, though lesser so than for common shares.
People who include stock consisting of the preferred shares of a company will do so when they have the following investment objectives of high liquidity and dividend income.
4. Taxation
Same as common stocks, earnings would be taxed on a capital gains basis and your losses would provide write-offs against gains. Any dividends paid to the investor are taxed on a gross-up basis with an accompanying dividend tax credit.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://financialinvesting14.blogspot.com/
http://financialinvesting13.blogspot.com/
All rights reserved. Any reproducing of this article must have all the links intact.