Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
3 Cards in this Set
- Front
- Back
- 3rd side (hint)
|
Forming a business - Memorandom of Association and Articles of Assocaition. Private companies - Ltd - one share holder Public companies - plc - minimum of 2 - only companies that can sell its shares to public. Limited = shareholders’ debts for the company limited to amount they agreed to pay at start. Company meetings - AGMs within six months of the financial year end. Companies act gives shareholders right to attend speak and vote or appoint proxy. Special resolution - 75% |
Type of equity - Long term borrowing is bonds and money invested as shares, stocks or equity’s. Ordinary - vote, do well if company does, agree final dividend, paid last, can be party paid. Preference shares - hybrid security, fixed income, non voting, paid back before ordinary shares. Cumulative = dividend rolls over if unpaid. Bumper profits at higher than fixed rate. Convertible = covert to ordinary shares & redeemable = shares cancelled, nominal value paid to holder. |
Benefits - dividends. (Shareholder compare dividend yield. If higher, then shows mature but capped prices eg water comp. Could be lower share price, prob unsuccessful and high dividend not expected to be sustained. If lower, share price is high as viewed to grow; or profit being accumulated rather than distributed.) Capital gains - need to be sold to realise. Shareholder benefit - discounts etc Shareholders rights - right to suscribe if new shares issued (pre-emptive rights). Right to vote, nominee account describe as bankruptcy remote as won’t fail. |
|
|
Risk of owning shares - market and price risk (share prices fall, volatile shares exhibit more risk than defensive shares etc utility) Liquidity risk - difficult to sell at reasonable price, or quickly enough to stop loss. Thinly traded companies (small) or falling prices due to spread between bid & offer getting bigger. Issuer risk - issuing company fails. new companies with no report have more risk. |
Corporate actions - mandatory corporate action = no intervention, e.g. dividend Mandatory corporate action with options = if shareholders don’t intervene, the default option will occur. E.G. rights issue. A voluntary corporate action = shareholders need to make decision, e.g. takeover bid. Bonus issue - X new shares for Y existing shares. Scrip or capitalisation. To increase liquidity or shares and lower price to become more attractive. Rights issue - offer of new shares to existing shareholders before the public. Can cause share price to rise and fall. Underwrites buy any shares not take by shareholders. Can take up rights, transfer to another investor or do nothing. Dividends - interim dividend and final dividend which needs approval at AGM. Through cheque or CREST. Cum-dividend purchaser will receive declared dividend, ex-dividend not entitled. T+2. Takeovers and mergers - more than 50% of company’s shares. |
Stock exchanges - IPO, listed/quoted, floating, going public. Prim market - new shares for first time. Sec market - investor selling shares through SE +capital, takeovers, status, employee incentives -regulation, takeovers, shortermism from shareholder pressure Requirements UKLA = PLC, market capitalisation of £700,000, trading for 3yrs, 75% historic profits, 25% shares in public hands, sufficient working capital for 12m & half yearly reports. AIM - apply to LSE. Appoint a NOMAD and non broker. Half yearly reports, full year report and price sensitive info. |
|
|
Indices - FTSE 100, FTSE 250, FTSE 350, FTSE All share. US - Dow Jones Industrial Average: narrow US - S&P 500: wider view US - NASDAQ: technology companies Japan - Nikki 225 France - CAC 40 Germany - Xetra DAX China - Hang Seng |
Trading - Quote driven = Continuous bid and offer prices during day, regardless of market conditions. Provide liquidity. NASDAQ & SEAQ. Order driven - electronic order book. SETS. Match buyers and sells in chronological order. Don’t require market makers. Guaranteed two way prices. Queue priority given on basis of price then time. Retail service providers - Harvest prices from range of RSP and respond to broker with best price. Provide quotation and dealing for retail stockbrokers. Other trading systems - SETSqx, not on SETS. SEAQ for not traded on SETSqx. ORB for UK gilts and bonds. MTFs non exchange. |
Holding title - register = investors name recorded on share register. Bearer = owner. Ownership transfers by share certificate so loss of certificate means loss of investment. T+10 Dematerialised so held electronically. T+2 settlement. Central & Clearing counter parties - record key trade, formalise legal obligations, match and confirm trade details, agree procedures for settling transaction, calculate settlement obligations. Settlement - CREST. Holdings uncertificated, real time matching, sterling euros or dollars, ETT, guarantees obligations to pay cash outside CREST, shares corporate and governments bonds, dividend and right issues, settlement when investor holds paper certificates. CREST = Trade matching - Stock settlement - Cash Settlement - Registrar Update. |
