Lecture 1b Flashcards
What is limited liability?
It means that, should the company be wound up, shareholders stand to lose only the amount that they have invested in the business
What is a private company?
It is a company that is restricted from issuing its shares to the general public
What is a public company?
A company that can offer its shares to the general public
What are directors?
Employees elected by the shareholders to run the company
What are ordinary shares?
They entitle their owners to receive an ordinary dividend from the company if a dividend is paid
What are preference shares?
They entitle their owners to receive dividends at a fixed rate before the ordinary dividend can be paid
What is the nominal value of shares?
It represents their face value and is nearly always the amount at which the shares are issued when the company is formed
What is a dividend?
It is a payment made to shareholders to reward them for investing in the shares of the company
What is the stock exchange?
It is a market where new capital can be raised and existing shares can be bought and sold
What is venture capital?
It is long-term funding, usually equity capital, provided to small and medium-sized businesses to help them grow
What are debentures?
They are long term loans raised by a company where security is usually provided for the loan
How would you calculate the number of shares issued?
total investment/ nominal value per share
How do you calculate the issue price per share?
total investment/ number of shares issued
How do you calculate share premium?
Issue price- nominal value
How do you calculate the % level of capital gearing
(Loans/total finance)x100
What is total finance?
TotalFinance=IssuedShareCapital+SharePremium+RetainedEarnings+Loans
What is a rights issue?
The method of raising new funds of existing shareholders by offering them the right to buy more shares at the same percentage cut as current shareholders
What is a bonus issue?
“Free” additional shares at the same percentage for shareholders
How do you calculate the gearing ratio?
(Loans/total assets)x 100
