4- Equities: types and features Flashcards
What is authorised share capital?
The maximum amount of capital a company can raise through the issue of shares
What is Issued share capital?
The amount of capital reflected in the shares issued
What are the 2 types of Issued share capital?
Paid-up share capital & Called-up share capital
What is Paid-up share capital?
The amount of the issued share capital that has been paid
What is Called-up share capital?
The amount of share capital still to be paid
What are the 3 main features of Ordinary shares?
-Variable dividends dependent on profits
-Generally have voting rights
-Last to be paid in dividends and on liquidation
What are the 3 main features of Preference/Equivalent shares?
-Fixed dividends (normally)
-Generally have no voting rights
-First shareholder to be paid
What are American Depository Receipts (ADRs)?
Non-US companies can sell shares to intermediary banks, who then sell the ADRs to American investors for dollars.
What is the nominal value of shares?
The value at which the issuing company initially lists them at
What is the formula for dividend cover?
Dividend cover = Earnings per share/Dividend per share
What is uncovered dividend?
Paid out of reserves to maintain a stable dividend
What is the total return formula?
Total return=(Δshare price+dividends)/initial share price
What is absolute valuation?
Based on absolute returns or discounting models
What are relative valuations?
Using multiples to compare with similar companies
What is the dividend discount model formula?
Ex-div share price=D0(1+g)/(r-g)
What is the formula for growth rate of dividends?
g=(retained earnings/earnings)x return on equity
What is the retention ration formula?
Retained earnings/earnings
What is a warrant?
The right to subscribe for new shares from the issuer at a fixed price on a future date
What is the formula for warrant value?
Warrant value = formula value + premium value
What is the formula for formula value?
Formula value = Market price of equivalent shares - Exercise price
What is premium value?
An additional value to reflect a potential increase in the price of the share
What is the formula for percent premium?
Percent premium = (warrant price - formula value)/(number of shares created x current share price)
