Module 2 Flashcards

1
Q

Factors Affecting Share Prices

A
  • External economic and political factors
  • Investor sentiment
  • Profit expectations
  • Dividend expectations
  • Takeover activity
  • The quality and track record of management
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2
Q

London Stock Exchange

  • The official list for main market
  • AIM
A

The official list or main market
- Companies that are admitted or listed on the LSE make up the main market

AIM

  • For companies that are too small for the OLOMM or too new to apply for a full stock market listing
  • Objective is to provide wider accessibility for young and developing companies seeking to sell their shares
  • Their shares are not described as listed
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3
Q

Cost of Buying and selling equities

A
  1. Commission
    - Charge from stockbrokers
    - Either flat fee or percentage based on the size of the deal
  2. Stamp duty / Stamp duty reserve tax
    - Government taxes charged on transfer of UK registered shares
    - SD paid when bought using stock transfer
    - SDRT paid when bought electronically through CREST
    - Not applicable on companies listed on the AIM
    - SD is paid for shares of £1,000
    - SDRT does not have a threshold of £1000
    - Rate for both is 0.5% on purchase price
    - SD and SDRT Paid by the purchaser not the seller
    - SD rounded to the next multiple of £5
    - SDRT rounded to the nearest penny
  3. The panel on takeover and mergers levy
    - Flat fee of £1 for all trades of £10,000 or more

Also Include spread

  • Offer price which investors buy at
  • Bid price which they sell at
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4
Q

Preference Shares and Ordinary Shares

A

Preference shares

  • pay a fixed half yearly dividend
  • only paid if there are sufficient after-tax profits
  • dividend payment has priority over ordinary shareholders
  • generally no voting rights (but may have them in some cases)
  • Yields are higher than bonds
  • rank ahead of ordinary share capital but after loan capital and all other creditors
  • Cumulative, non cumulative, participating, redeemable and convertible preference shares

Ordinary shares
- Last to be paid out in event of liquidation
- one share means one vote, more shares means more votes
-

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5
Q

SDLT and commercial bodies

A

Charged 15% on residential dwellings costing more than £500,000 bought by bodies such as companies or collective investment schemes

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