Stocks Blogspot
Stocks Blogspot
Financial Investing 15 – Understand Equity Market – Common Stocks
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/
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