Shares and Dividend
Defining A Company
Joint stock company: In order to run the business several persons joined to form a joint stock company.
Limited company: It is registered with the government and is called Limited company.
Capital stock: The total money invested by the company is called its capital stock.
Share: The capital stock is divided into a number of equal units. Each unit is called a share.
Shareholder: The persons having "shares are called shareholders. Shares may be of any amount but generally they are of Rs. 10, Rs. 100 etc. shares of Rs. 10 is called Rs. 10 shares, but in case of Rs. 100 share, it is generally called Rs. 100 stock.
Nominal value: Every shareholder gets a stock certificate is called its nominal value or face value or the par value of the share.
Market value: The value of the share quoted in the market is called the market value.
Above par and below par : If the market value is more than the face value, it is said to be at premium or above par. But when its market value is less than the face value, it is said to be at a discount or below par.
Dividend : The part of the profit of a company which is distributed amongst the shareholders is known as dividend.
Note:
(1) The face value of a share always remains the same, while its market value goes on changing.
(2) The company declares dividend on the face value of shares.
Kinds of shares:
They are of the following kinds:
(i) Preference shares
(ii) Equity shares or Ordinary shares
(iii) Deferred shares,
Brokerage: Commission charged by a broker is called brokerage.
Brokerage is charged from both the buyer and the seller.
Brokerage is calculated on the market value of the shares.
The sale and purchase of shares is generally done through persons called shareholders or .simply brokers.
-A buyer has to pay market value to the shareholder and brokerage to the broker.
- The seller of the shares receives the market value but has to pay the brokerage to the broker.
Debentures: Debentures are a debt of a company.
A debenture holder receives interest on the debenture at a fixed rate of interest, irrespective of the profit or loss of a company.
Remarks:
(i) The interest on a debenture is calculated on its face value.
(ii) The brokerage involved in the sale or purchase of debenture is calculated on their market value.
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