Role of shareholders

Question 1

What are shareholders and what do they do in LTD?

Answer 1

• Provide funds
• In small LTDS often directors
• Optional to have an annual general meeting for shareholders
• Vote on decisions
• Earn a dividend

Question 2

Role and what shareholders do in PLC?

Answer 2

• Provide funds
• Legally have an annual general meeting for shareholders
• Vote on decisions
• Earn a dividend
• 50% of shares = majority shareholder

Question 3

Why do shareholders invest?

Answer 3

• To make a capital gain by buying and selling shares
• Dividends - paid per share
• To be involved in the running of a business in small LTD
  
  • Influence decision making in PLC - The majority shareholder
• If they believe in its mission and objectives
• To help a small LTD survive or grow
• Venture capitalists, invest if company will grow

Question 4

How are share prices decided in LTD

Answer 4

• agreed-upon all shareholders
• Privately traded
• Price per share agreed with an investor based on performance and value of the company.

Question 5

Factors that affect demand for shares of PLC companies

Answer 5

• Performance- higher profits = higher dividends
• Speculation - A rumoured activity that will increase business profits
• Current share price - Low price, capital gain
• Interest rates - low-interest rates mean the reward for investing is greater than saving in a bank
• Economy - strong more money and confidence to invest

Question 6

What are the short/long term effects of a change in share prices?

Answer 6

• Shareholders hoping to make a capital gain may hold onto shares, if the price decreases and wait for an increase
• Long term investors are less affected by short term changes
• Short term change has less of an effect on a business if they already have their share capital,
• Long term decrease in a price reduces investors’ confidence.