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1. AF4 > Equities > Flashcards

Equities Flashcards

1
Q

What stamp duty is payable on Equities?

A

Paper-based = stamp duty = 0.5% rounded up to next multiple of £5

No stamp duty on transactions under £1,000

Min is £10

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2
Q

What stamp duty reserve tax is payable on equities?

A

No certificate and done electronically (CREST)

0.5% of purchase price rounded to nearest penny

Applies to any size of transaction

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3
Q

What is the PTM levy

A

The Panel of Takeovers and Mergers Levy

Flat charge of £1 on all trades over £10,000

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4
Q

What is the admission criteria for AIM listing?

A

Appoint (and retain) a nominated adviser

Issue necessary documentation prior to listing

If an investing company raise at least £3m

Produce annual accounts

Comply with AIM rules and pay AIM fees

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5
Q

What are the features of preference shares?

A

No voting rights

If redeemed usually at par value

Generally pay fixed dividends

Rank ahead of ordinary shares in payment of dividends and on liquidation

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6
Q

What is the order of priority of investors in the event of liquidation?

A

Debentures - fixed charge

Debentures - floating charge

Unsecured corporate bonds (loan stock)

Preference shares

Ordinary shares

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7
Q

What are the types of preference share?

A

Cumulative - any shortfall in dividends must be paid at a later date before any future dividends for ordinary shareholders - always this unless otherwise stated

Non-cumulative - any shortfall in dividends will not be carried forward

Convertible - can convert in ordinary shares at a pre-set date and term

Participating - additional dividend payable if profits go above an agreed level

Redeemable - redemption date set

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8
Q

What is Private Equity?

A

Ownership or part ownership of trading companies not traded on major stock exchange

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9
Q

What are the limitations of investment ratios?

A

Comparison in same sector

Snapshot at a certain date - will change

Historic data - no reflection on future performance

Some data will be based on assumptions that may be subjective - eg expected future growth

Need to look at real figures to take inflation into account as some increase in earnings can be in part down to inflation

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10
Q

How is capitalisation of companies calculated for leading equity indices?

A

Multiple number of shares in issue by the current share price

Will fluctuate with share price as number of shares usually fixed

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11
Q

What is the FTSE 100 and how often is it reviewed?

A

100 largest companies by capitalisation

Reviewed quarterly

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12
Q

What is the FTSE 250?

A

Next 250 after FTSE 100 by capitalisation

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13
Q

What is the FTSE 350?

A

The FTSE 100 and 250 together

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14
Q

What’s the FTSE All-Share Index?

A

630 companies representative of overall market

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15
Q

What’s the FTSE Small Cap?

A

FTSE All-share companies that are too small for the FTSE 350

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16
Q

What are the limitations of Indices?

A

Don’t include reinvested dividends

Small number of large companies can have a major effect - due to weighting’s

Don’t include CGT

Don’t include dealing and management costs

Assume fully invested and no cash

17
Q

Why would a company do a rights issue?

A

To fund expansion

Strengthen the balance sheet

Refinance

18
Q

What factors affect share prices?

A

Economic and political - inflation, productivity, growth and gov fiscal and monetary policy

Investor sentiment

Business specific factors - profit/div expectations, takeover activity, mgmt. track record

19
Q

What rights to ordinary share holders have?

A

Entitlement to all of profit after tax and preference shares - some profit r etained in business to increase value

Vote entitlement - except A shares

Entitled to residual value of company assets after debts

20
Q

What options do shareholders have under a rights issue?

A

Subscribe for new shares and pay full amount

Sell rights in the market

Sell enough to generate cash to take up remainder

Lapse - company sells and distributes proceeds after costs

21
Q

Why use a Bonus share issue and what is it?

A

Used to bring share capital in line with real worth

reduces share price to make it more attractive

Shares issued fully paid to shareholders

also called Scrip Issue

22
Q

What are indices and how used?

A

Means to measure performance of share portfolio over time

Compare particular share to overall market

compare fund managers performance to overall mkt performance

23
Q

Interim and final dividends?

A

Interim declared during financial year, by board, can be revoked and only if Articles expressly permit

Final declared after financial year, by shareholders, can’t be revoked, not subject to articles its right of shareholders

1. AF4 (21 decks)

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