Equities Flashcards
What does the secondary market do for shares?
Allows sale of equities for liquidity but does not raise capital for companies
What are the markets for uk stocks?
London Stock Exchange (LSE)
Alternative Ivestment Market (AIM) for those that don’t qualify for the LSE
How are shares categorised
Size
Correlation with the economy
Finacial characteristics
What does UKLA do?
They are a special part of the FCA that decides which companies can be listed and go on the main market.
Who regualtes the AIM
The LSE
What is AIM for
Allow access to primary and secondary markets for smaller newer firms.
Less barriers to entry
Costs are lower.
What are ordinary shares?
Bulk share of a company
Rank behind other shares in receiving dividends
What is the dividend allowance?
There is no tax on the first £1000 of dividend
What does a basic tax rate payer pay on dividends?
8.75%
How much do higher rate taxpayers pay on dividends?
33.75%
How much do additional rate tax payers pay on dividends?
39.35%
What are preferences stocks?
Pay a fixed rate of return, but only when the company has sufficient profits
Ranks ahead of ordinary bonds for paying dividends and company going bust.
What are the different types of preference shares?
Cumulative - pays missed divs later.
Non-cumulative - div lost
Participating - fixed dividend and can have bonus
Redeemable - firm buys back at preset date or when they choose.
Convertible - to ordinary shares
What costs come with buying and selling shares?
Commision to dealer
Stamp duty or SDRT
POTAM levy
Describe stamp duty
Paper transactions
0.5%
Nearest £5
£1000 threshold
Describe SDRT
Electronic transactions
0.5
Nearest penny
No threshold
What is stamp and SDRT not spent on?
AIM
OEICs
Unit in trusts
What is the POTAM levy
£1 on transactions over £10000 paid to the panel of takeovers and mergers.
Responsible for looking into competitive impacts of mergers and takeovers
What are the risks of equities?
Share dividend volatility
Equity capital risk
Counterparty failure (FSCS may pay)
Currency risk
Liquidity risk
Regualtory risk
What is earning per share for?
Seeing trends in profitability.
Comparison
Profits are distributed after tax, so remember to remove them if given.
What is P/E ratio used for?
How high investors value earnings of company?
High = more demand and higher willingness to pay price
or overvalued
What is the dividend per share used for?
Comparison of return between shares, bonds cash deposits.
Dividend yield
Shows the return investors are receiving in the way of annual income.
Does not necessarily mean sustainable
What is the dividend cover used for?
Shows how many times the dividend could have been paid from the periods profits.
Less than 1 would suggest utilising reserves
What is NAV for?
Shows the value of a company for accounting purposes
Reflects the true value of a company from their balance sheet rather than by Market sentiment.
What is the FTSE All-share
625 companies on the stock exchange reviewed each December
What is the FTSE 100
Top 100 firms in the UK by Market cap.
Revised quaterly
90% of UK market capitisation
What is the FTSE 250
Next 250 after FTSE 100 by Market cap.
Reviewed quarterly
8-10% of market capitalisation
What is the FSTE 350
FTSE 100 and 250 combined
98% of market capitalisation
What is the FTSE small cap
Last 2% of the FTSE all share
What is the FTSE fledgling
Smallest on FTSE. Too small for market cap
What is the FTSE all small
Combination of FTSE small cap and fledgling
What is the FTSE AIM 100
Largest 100 companies on the AIM
What is the FTSE AIM 50
Largest 50 companies on the AIM
What is the FTSE AIM all-share index
All AIM companies meeting the eligibility criteria.
Most commonly used in the UK when comparing price and yield movements
What is the dow Jones industrial average?
Main 30 blue chip companies in the US
What is the DOW Jones EuroStoxx 50?
US measure of the top 50 European stocks
What is the standard and poors composite
Main 500 companies on the US stock exchange
What is the NASDAQ composite?
Smaller US companies
What is the Nikkei 255?
Largest Japanese stocks but not weighted
What is the Topix
A wider, more comprehensive version of the Nikkei 225
What is the Dax 30
Largest 30 quoted German companies
What is the hang seng?
Broad movements in Hong Kong stocks
What is the CAC general
Opening prices on the paris cash market
What is the CAC 40
Real-time weighted index of largest French stocks
What is the issue with indices?
Largest companies have a disproportionate effect on index
Most don’t take account of dividends
What is the issue with indices?
Largest companies have a disproportionate effect on index
Most don’t take account of dividends
What do ordinary stocks include?
Voting and defered
What CGT is payable on equities?
10 or 20%
£6000 exemption available
