Week 13 - Ordinary (Equity) Shares

Question 1

How common are ordinary shares?

Answer 1

They are the most common form of shares, and unless different classes of shares exist, all shares will be ordinary

Question 2

When compared with preference shares?

Answer 2

The ordinary shares have a lesser status and the holders are more at risk if problems affect the company’s ability to pay dividends or its solvency

Question 3

If the company goes insolvent…

Answer 3

They are the last to get any payment out of the company

Question 4

When are they entitled to a dividend?

Answer 4

Only entitled to a dividend after preference shareholders receive theres

Question 4

What do they have the right to do?

Answer 4

Have the right to vote at general meetings and the right to receive a dividend if one is declared

Question 5

There may also be a provision for the preference shareholders to…

Answer 5

Receive a share from the company’s remaining assets before ordinary shareholders in the event of the company being wound up

Question 6

What are the first 2 key facts about ordinary shares?

Answer 6

• most common type of share
• ordinary shares are issued without any special rights being attached to them

Question 7

What are the second 2 key facts about ordinary shares?

Answer 7

• typically carry most of the voting rights
• BUT rank behind preference shares for payment of dividends

Question 8

What are the final 2 key facts about ordinary shares?

Answer 8

• dividends are discretionary
• thus, carry more risk