Investments

Question 1

Ordinary shares are? Comprise?

Answer 1

Behind other shares in getting dividends. May receive whats left after other liabilities. Bulk of company.

Question 2

Deferred ordinary shares?

Answer 2

No dividend until particular date/event/other ordinary shares received dividend.

Question 3

Preference shares pay? Types?

Answer 3

Fixed rate of return where company can.
Cumulative: Catches up missed payments.
Participating: In good eyars may receive more profit.
Redeemable: Firm may buy back shares at pre-set date.
Convertible: exchangeable for ordinary shares.

Question 4

Costs in buying/selling shares?

Answer 4

Commission
Bid-Offer Spread
SD/SDRT
POTAM Levy

Question 5

EPS?

Answer 5

= Net Profit/Ordinary Shares
- Net profit after tax, preference dividends

Question 6

Dividend Yield?

Answer 6

Amount of income received as % of share price.
DPS = Ord Div Paid/Ord shares in Issue
DY = (DPS/Current Price) x 100%

Question 7

Dividend Cover? E.g if <1?

Answer 7

= EPS/DPS
or
= Net Profit/Ord Div Paid
Company has raided profit reserves to pay high dividend.

Question 8

P/E Ratio? Can idnicate?

Answer 8

= Current Price/EPS
Outlook for future growth.

Question 9

Liquidity Ratio? Indicates?

Answer 9

= (Current Assets-Stock)/Current Liabilities
Ability to meet short term liabilities if needed (<1 essentially insolvent).

Question 10

Gearing?

Answer 10

= Total Debt/Total Equity

Question 11

NAV? NAV per share?

Answer 11

Share of net assets of company attributable to each shareholder.
= (Total Assets - Total Liabilities)/Ord Shares in Issue

Question 12

Basic indicators?
- P/E
- Yield
- NAV

Answer 12

• Outlook
• Returns
• True Value