Shareholders, share and share price

Question 1

Who buys shares?

don’t need all

Answer 1

• rest of world (other countries - investment trusts
• insurance companies - other financial institutions
• pension funds - charities, church etc
• private individuals - private non-financial companies
• unit trusts
• public sector
• banks

Question 2

Who are mot shares in UK businesses invested by?

Answer 2

The rest of the world (other countries) and financial institutions, 10% are owned by private individuals.

Question 3

Why do we buy shares?

Answer 3

1. Financial gains - receive share of the profits (dividends)
2. Buy in hope that share price will increase
3. Some shareholders look for short-term investment and quick returns, some will be investing for the longer term reward (however this comes with lots of risks).

Question 4

Name the risks of buying shares

Answer 4

• price bought share at could fall significantly

- low profits mean lower than expected dividends

Question 5

Name the factors that influence people to buy shares

Answer 5

• shares grant voting rights to the share owner 1 share = 1 vote
• share companies can raise questions at the company’s AGM (annual general meeting)
• shareholders can be critical of the pay of senior managers in the company

Question 6

What influences share price?

Answer 6

• the performance of the company (internal)

- economic conditions (external)

Question 7

name the effects of rising share prices

Answer 7

• reflect well on the companies managers

- make it easier for business to raise capital/gain investment

Question 8

name the effects of falling share prices

Answer 8

• reflect badly on managers (shareholders may vote manager out)
• make it difficult to raise capital
• make the company vulnerable to take over