Types of shares

Question 1

Types of shares

Answer 1

-Ordinary shares
-Preference shares
-Bonus shares
-Founders shares

Question 2

Ordinary shares

Answer 2

-Normally the higher the net profit, the higher the dividend

-Ordinary shares only receive dividends where profit is made

Question 3

Preference shares

Answer 3

-A fixed rate of return is paid on this type of shares

-Voting rights are restricted to particular resolutions

Question 4

Founders shares

Answer 4

-They receive dividends after all other shareholders were paid

-Issued to the founders and promoters of the company

Question 4

Investment concepts

Answer 4

-Debentures
-Dividents
-Capital gain
-Simple interest
-Compound interest

Question 5

Capital gain

Answer 5

-Refers to the growth in value of assets in relation to the original amount invested over a certain period

Question 6

Simple interest

Answer 6

-Refers to the amount of interest earned based on the original investment of the investor

Question 7

Compound interest

Answer 7

-Refers to the amount of interest earned based on the original amount invested, as well as interest earned in the preceding years that were added to the original amount invested

Question 8

Difference between simple interest and compound interest

Answer 8

Simple interest:
-Interest earned on the original amount only

-The value of the original amount remains the same for the duration of the investment

-The return on investment is lower than the return of investment of compound interest

Compound interest:
-Interest earned on the original amount invested, and the interest earned in the preceding years is added to the original

-The value of the original amount increases as additional interest is added in subsequent years

-The return on investment is higher than the return on investment of simple interest

Question 9

Types of preference shares

Answer 9

-Participating
-Cumulative
-Redeemable
-Non-cumulative
-Convertible
-Non-convertible

Question 10

Participating preference shares

Answer 10

-The investor is certain of receiving a minimum fixed dividend from the company

Question 11

Non-participating preference shares

Answer 11

-The investor is certain of receiving a minimum fixed dividend from the company

-They do not share in any surplus profit the company has made

Question 12

Cumulative preference shares

Answer 12

-Investors will receive payments for past dividends that were not paid out because of poor financial performance by the company

Question 13

Non-cumulative preference shares

Answer 13

-Investors will not receive payments for past dividends that were not paid out because of financial poor performance by the company

Question 14

Redeemable preference shares

Answer 14

-Investors can sell the shares back to the company they bought them from at a fixed price should the company so desire

Question 15

Non-redeemable preference shares

Answer 15

-Investors can sell the shares back to the company they bought them from at a fixed price should the company close down for reasons other than insolvency

Question 16

Convertible preference shares

Answer 16

-The investor can convert the shares into a fixed number of ordinary shares on a future date determined on the date the shares were issued

Question 17

Non-convertible shares

Answer 17

-The investor can convert the shares into a fixed number or ordinary shares