Ch16: Shares and Securities

Question 1

Formula to value Quoted Shares.

Answer 1

Low Price + 1/2 (High Price - Low Price)

Question 2

What are the matching rules for the disposal of shares?

Answer 2

(1) Acquisition on the SAME DAY.

(2) Acquisition in the NEXT 30 DAYS (FIFO Basis)

(3) Shares in the SAME POOL.

Question 3

What is meant by Bonus Issues?

Answer 3

Shares issued by a company in proportion to each shareholder’s existing holdings, at no extra costs.

Question 4

What is meant by Rights Issues?

Answer 4

Offer new shares to existing shareholders only in proportion to their existing shareholdings at a price which is usually BELOW MV.

Question 5

What is meant by Reorganisation?

Answer 5

New shares are issued in exchange for the original shares.

Question 6

What is meant by Takeovers?

Answer 6

When one company acquires the shares in another company either in exchange for cash, shares or a mixture of both.

Question 7

What is the formula to calculate Takeovers when there are CASH elements involved?

Answer 7

A / (A+B) where:
A = Cash Element
B = Non-Cash Element (i.e. MV at Takeover)