Share Capital

In: Business and Management

Submitted By komal
Words 1829
Pages 8
Share Capital
It is the amount of money contributed by the shareholders for the furtherance of objectives of the company for which it was created. * Equity / Preference Share * Par value * Number of Shares in each category * Total amount
TYPES OF SHARE CAPITAL * AUTHORISED CAPITAL * ISSUED CAPITAL * SUBSCRIBED CAPITAL * CALLED UP CAPITAL * PAID-UP CAPITAL
AUTHORISED CAPITAL * MAXIMUM amount of share capital that the company is authorised by its constitutional documents to issue to shareholders. * Part of the authorised capital can (and frequently does) remain unissued. * EXAMPLE: AS PER THE CONSTITUTIONAL DOCUMENT OF A NEW COMPANY ‘XYZ.LTD’
IT CAN ISSUE A TOTAL OF 10 LAKH SHARES OF RS 10 EACH FACE VALUE/PAR VALUE: IT IS THE FIXED DENOMINATION AT WHICH A COMPANY ISSUES ITS SHARES. THE FACE VALUE IS MENTIONED ON THE SHARE CERTIFICATE.
ISSUED CAPITAL * THE PART OF AUTHORISED CAPITAL WHICH IS OFFERED TO THE PUBLIC FOR SUBSCRITION * EXAMPLE : * OUT OF 10 LAKH SHARES, COMPANY ‘XYZ LTD.’ ISSUES 7 LAKH SHARES OF RS 10 EACH
SUBSCRIBED CAPITAL * PART OF ISSUED CAPITAL THAT IS APPLIED FOR BY PROSPECTIVE SHARE HOLDERS & ALLOTED BY THE COMPANY * UNSUBSCRIBED CAPITAL :BALANCE OF ISSUED CAPITAL NOT SUBSCRIBED BY THE PUBLIC * EXAMPLE :

SITUATION 1: UNDERSUBSCRIPTION
‘XYZ LTD.’ GETS PROSPECTS FOR 6 LAKH SHARES SITUATION 2: OVERSUBSCRIPTION
‘XYZ LTD’ GETS PROSPECTS FOR 8 LAKH SHARES * PREMIUM: IT IS THE AMOUNT PAID AT THE TIME OF PURCHASE OF SHARES MORE THAN THE FACE IT. * DISCOUNT: IT IS THE AMOUNT PAID AT THE TIME OF PURCHASE OF SHARES LESS THAN THE FACE VALUE OF IT. * OVERSUBSCRIPTION: A SITUATION IN WHICH THE INVESTORS APPLY FOR MORE SHARES THAN THE COMPANY ISSUES. * UNDERSUBSCRIPTION: A SITUATION IN WHICH A COMPANY GETS LESSER APPLICATION THAN THE…...

Similar Documents

Share Market

...RECENT TRENDS IN CAPITAL MARKET OF BANGLADESH: CRITICAL EVALUATION OF REGULATION by Syed Golam Shahjarul Alam A thesis submitted in partial fulfillment of the requirements for the degree of Professional Master in Banking and Finance Examination Committee: Dr. Sundar Venkatesh (Chairperson) Dr. Winai Wongsurawat Dr. Yuosre Badir Nationality: Previous Degree: Bangladeshi Master of Business Administration University of Dhaka Dhaka, Bangladesh Bangladesh Bank (Central Bank of Bangladesh) Scholarship Donor: Asian Institute of Technology School of Management Thailand May2012 ACKNOWLEDGEMENTS My greatest Gratitude is given to Dr. Sundar Venkatesh, my project advisor, for his deep insight in capital market, which helped me to accomplish the project paper. His dedication towards teaching, motivating and supervising influenced me greatly, leading to do my project work carefully and seriously. I wish to express my deepest gratitude and appreciation to Bangladesh Bank, My office, for granting me a scholarship, to pursue my Masters in banking and finance. I express my gratitude and deepest appreciation to my friend Ms. Senjuti binte rafiq, My Colleagues in Bangladesh Bank and DSE Library staffs who helped me by providing valuable suggestions and necessary data for my analysis. I am very much thankful to Dr. Winai Wongsurawat and Dr. Juthathip Jongwanich for their valuable suggestions regarding my project. I express my gratitude and deepest appreciation to Ms...

Words: 15692 - Pages: 63

Capital

...your own group of three or four students. In your write-up please answer the following questions: 1. Does Pioneer estimate its overall corporate weighed average cost of capital correctly? If not, re-estimate the WACC (showing and/or explaining your calculations). 2. Should Pioneer use a single corporate cost of capital or multiple divisional hurdle rates in evaluating projects and allocating investment funds among divisions? Why or why not? If multiple rates are used, how should they be determined? 3. How should Pioneer set capital budgeting criteria for different projects within the same division? What distinctions among projects might be captured in these criteria? How should these different standards be determined? XIII. Capital Budgeting Process Report In this assignment, your group is required to select a firm and identify an individual within the firm with a good understanding of the firm’s capital budgeting process, and interview this individual to learn as much as possible about the capital budgeting process. You may choose a firm where you are already employed provided that you are not already knowledgeable the capital budgeting process in your firm. You should not choose start-up firms because these firms have not had the opportunity or the experience to develop a sound capital budgeting process. Firms that are unwilling to provide the necessary information because of concerns of releasing confidential information should also be avoided. You......

Words: 1416 - Pages: 6

Share Valuation

...Introduction: The main in this research assignment is to determine whether an investor should buy, hold, or sell the carefully chosen shares. The "Three-step down approach" was used to make conclusions and it also served as a guideline to the research. The two stocks that were chosen for the research falls within the financial sector, these two are FNB (First Rand Bank) and Nedbank. A brief analysis of the state of the economy and the financial industry was done. Furthermore a thorough investigation and analysis was done in respect of both firms. The Discounted cash flow and relative valuation techniques are used, both of these uses quantitative information. Cumulative information will also be incorporated to answer the objective and research hypothesis in a scientific and logical way. Statement of the problem: The business problem for the purposes of the research assignment is: Will an investor buy shares in Nedbank or FNB? If an investor owns shares in Nedbank or FNB, will he keep it or rather sell it? As an investor, the primary goal is to find the investment that will give you the highest return with the lowest risk. Investors also looks for the investments that can be bought at a discount in order to deliver a higher return on sales when sold, but also to sell the investment at a premium in order to deliver a higher return on the sale of the investment. To calculate whether the investor is investing at a discount or premium or selling at a discount or premium the......

Words: 5046 - Pages: 21

Share

...and development. We saw several examples from our classmates this week on how culture affected their organizations. My company was obstructed by its owner and the organization’s culture when he decided not to develop and expand a wing on the small private hospital we operate because it had sentimental values to him. One team member found the reading material resourceful and thought it could be used at her organization. The main topic enlightened her was organizational culture and the factors that play a beneficial and liability role in the organization. She noted that “Even though some of the examples exist in my organization, I found it exhilarating to know that management is heading in the right direction by allowing employees to share their views about what happens in the workplace that is definitely beneficial to the organization. Being able to express yourself is important to many individuals within an organization because not only will it help to motivate employees but it also increases productivity which is a key factor in gaining profitability. As for an organization’s liability, this can happen if employees do not want to adhere to new changes in a company such as a new CEO. Often when a new CEO comes on board and begins to make changes to address problems for the betterment of the organization, employees may feel that the changes are not necessary because the organization appears to be doing well. The employees could wonder why change was needed if the......

Words: 700 - Pages: 3

Shares

...The first characteristic of common shares is ownership in the company. Investing in common shares means owning a (very small) piece of a company. Ownership is important as it allows the investor to benefit from growth in the company. Besides, another characteristic is it can participate in Corporate Success. As a common shareholder of a public company, you may directly and indirectly share in the profits of the company. Moreover, dividends and capital gain are also the characteristic of common shares. Dividends that the company declares and pays come from the earnings of the company. If the company does well, you can directly benefit by receiving dividends. Normally, there is no right to a dividend for common shareholders (unlike preferred shareholders). But if the company deems it prudent, excess earnings are often paid out to common shareholders. We will look at dividends a little more later, as they are integral to some investors’ strategies. For capital gains, you may indirectly share in the company’s success by the value of your stock increasing. A change in the share value has many causes. Earnings – current, but more importantly the expected future earnings – is a major determinant of share price. If the earnings outlook appears rosy relative to competitors, other companies, other asset classes, etc., the share price should increase. We will review the factors that impact share valuations later. Besides that, common shares have limited liability. A corporation is......

Words: 998 - Pages: 4

To Share or Not to Share

...To Share or not to Share Peter Todd Shawshank University To Share or not to Share Have you ever taped music off your favorite radio station? That's the old way you would do it if you can't afford the albums. Today people are not only downloading music off the internet but also pictures, movies, games, software and any other kind of computer files that could be beneficial. Each week there are more than one billion downloads of music files alone. Participation in file sharing has also grown. Over 60 million Americans above the age of twelve have downloaded music (Ipsos-Reid, 2002b). File sharing is heavily linked to youth. While a majority of Americans under 18 years old have downloaded and half of those are heavy users, only a fifth of those aged 35-44 have downloaded files (Edison Media Research, 2003). Among U.S. adults at least 18 years old, the number of downloaders has about doubled since 2000 (Pew Internet Project, 2000 and 2003). Because physical distance is largely irrelevant in file sharing, individuals from virtually every country in the world participate. When peers download, they don't all download from one place. Millions of peers around the world are connected and they download files off of each other's computer.  Popular networks are Kazaa, WinMX, Limewire, Morpheus, Frostwire and many more. Downloading files is free, but many people are confused that it would be stealing. The RIAA (Record Industry Association of America) had announced that it is......

Words: 1741 - Pages: 7

Analysis of Share Capital as a Source of Finance

...TOPIC: ANALYSIS OF EQUITY SHARE CAPITAL AS A SOURCE OF FINANCE IN AN ORGANISATION RESEARCH PAPERS The 2 research papers under study are 1. The effect of CEO ownership and shareholder rights on cost of equity share capital. 2. What motivates seasoned equity offerings? Evidence from the use of issue proceeds. COST OF EQUITY CAPITAL AND ITS EFFECTS TO THE MANAGEMENT Introduction This paper investigates the cost of equity capital and its effects to the management which intends to hinder shareholders right. The purpose of which is to investigate whether managerial ownership affects the associations between the shareholders rights and the cost of equity capital. There are two variables in the article which can be clearly identified. The variables are; 1) The shareholders rights and 2) The cost of the equity capital. 1) THE SHAREHOLDERS Shareholders should have the right to discipline the managers, who are the employees of the organization, in the case of the mismanagement or the improper use of the funds. The shareholders have right to demand for the success of the organization through competing aggressively in order to gain profitability. The shareholders have right to elect and remove the management from the office and also to access or evaluate the books of accounts of the organization. 2) COST OF EQUITY CAPITAL Rate of return of equity Current market price and the nominal value of equity capital CONCEPTUAL FRAMEWORK THE AGENCY PROBLEMS: THE......

Words: 4117 - Pages: 17

Share

...mainstream groups. This process could take decades and generations; all the more reason why it is important for community builders to understand the social organization and leadership structure of the new arrivals and to build on their values and strengths. While some traditional social structures may prevail, others may adapt to those of the mainstream culture. Take a moment and think about the most recent group of newcomers to your community. Who are their leaders? Where do their members go to for help? Think about the group you belong to. Who are the leaders? Whom do you go to for help? How is your group organized to communicate among its members? Obviously there are too many groups in this world to include in this section. We will try to share information about as many groups as we can. While the section may not inform you about the social organization and leadership of groups other than the ones described here, we hope it will help you understand enough about the influence of culture on social organization and leadership to ask the right questions of any group. HOW DO CULTURE AND OTHER FACTORS AFFECT THE SOCIAL ORGANIZATION OF A COMMUNITY? There are many definitions of culture. Culture typically refers to a set of symbols, rituals, values, and beliefs that make one group different from another. Culture is learned and shared with people who live or lived in the same social environment for a long time. Culture is captured in many, many ways -- in the way members of a group......

Words: 5041 - Pages: 21

Share

...Value of Equity and Per Share Value when there are options and warrants outstanding Aswath Damodaran 1 Equity Value and Per Share Value: A Test l Assume that you have done an equity valuation of Microsoft. The total value for equity is estimated to be $ 170 billion and there are 1204 million shares outstanding. What is the value per share? 2 An added fact l On September 30, 1997, Microsoft had 258 million options outstanding, granted to employees over time. These options had an average exercise price of $ 42 (the current stock price i $ 140). Estimate the value per share. 3 Equity Value and Per Share Value l l The conventional way of getting from equity value to per share value is to divide the equity value by the number of shares outstanding. This approach assumes, however, that common stock is the only equity claim on the firm. In many firms, there are other equity claims as well including: – warrants, that are publicly traded – management and employee options, that have been granted, but do not trade – conversion options in convertible bonds – contingent value rights, that are also publicly traded. l The value of these non-stock equity claims has to be subtracted from the value of equity before dividing by the number of shares outstanding. 4 Warrants l l l A warrant is a security issued by a company that provides the holder with the right to buy a share of stock in the company at a fixed price during the life of......

Words: 1339 - Pages: 6

Shares Investment

...based on our current knowledge of markets. Further discussed will be the adopted investment strategies as well as techniques for investing on the JSE. Lastly, a listed description of the companies and types of shares that will be invested in. Investment Philosophy: Since there is a time constraint of six month for this investment challenge, this investment strategy will be based on the short to medium term. This is based on our current, acquired knowledge and experience of the market. As time goes by there is expectation that the philosophy will evolve as more will be learned about the markets. After evaluating the personal and financial characteristics of the overall group, the following principles were agreed upon: * Don’t lose capital * Know the stocks you own * Research, Read and Think thoroughly before buying * Invest in no more than a total of eight companies Given the short period, the underlying goal is to make the highest possible profit in this time by carefully studying the market and following the trends produced. Our underlying philosophies based on goals and time horizon are ; to buy stocks based on trend lines and high trading volume; buying after positive market news; buy stocks that have gone up in the last few months, buy small capital stocks with substantial insider buying. The motto being followed:“ As long as the outcome is income”. INVESTMENT STRATEGIES: In choosing an investment strategy, careful consideration must be given to......

Words: 1046 - Pages: 5

Capital

...to keep paid-in capital separate from earned capital? The owner's equity is subdivided into two categories, which represent the two ways that owners can make contributions to the corporation: * Contributed capital, which includes the contributions to the corporation in return for common stock * Earned surplus (also called retained earnings), which is comprised of the corporation's cumulative earnings, less distributions of those earnings (i.e., dividends) Thus Paid in capital is capital received from investors in exchange for stock. This is recorded as an entry on the balance sheet. Investopedia Says: This term is sometimes also referred to as contributed capital or share capital. Paid in Capital is capital that is brought in by investors in return for stock. It is not capital that is generated as a result of the operation of the company. Also referred to as Contributed Capital or Paid in Surplus. Paid-in capital comes from the corporation’s stockholders who invested in the company. The contributed capital (common stock) is further divided into the minimum or stated capital (amount paid in for par value or, absent a special allocation, the total amount paid in for no par stock) and the capital surplus (amount paid in above minimum, or stated capital) Earned capital is generated through profits of the business. It come from the corporation’s customers. It is important to keep paid in separate from earned capital as: Paid-in capital is more......

Words: 583 - Pages: 3

Managerial Economics - a Company Has 5,000 Shares of Rs 100 Each. It Goes for Capital Restructuring and Issues Debentures for Rs 2,00,000 to Buy Back the Shares. If the Interest Rate on Debentures Is 10% with No Tax

...Analysis. 5. What is Capital Rationing? Section – C (Marks – 50) Attempt any five questions – 1- Explain in detail the nature and scope of Managerial Economics. How Micro Economics differs from Managerial Economics? 2. What is Empirical Production Function? Explain the optimum combination of inputs with diagrams. 3. What is Cost of Capital? Explain its structure and role in inter- national competitiveness. 4. What is Elasticity of Demand? Explain Price, Cross and Income Elasticity of Demand used in managerial decision making process. 5. What do you mean by Monopoly? How price and output is determined in short and long run in Monopoly Competition? 6. Describe the Oligopoly Model in detail. 7. Explain management of foreign exchange with special reference to India Financial Management Section – A (Marks – 25) Attempt all questions 1. Write an important condition for the adjustment of the cost of debt. 2. What does the cost of equity capital indicate? 3. Explain Capital Budgeting? What is post completion audit in the process of capital budgeting? 4. Explain Merit and Demerit of Payback Period Method? 5. What is Working Capital? State the difference between gross working capital and net working capital. Section – B (Marks – 25) Attempt all questions – 1. Define current assets and Give four examples. 2. Explain the role of ‘Operational efficiency’ in the determination of working capital......

Words: 1096 - Pages: 5

Managerial Economics - When Financial Leverage Is Considered Favorable Are the Share Holders of a Company Likely to Gain with a Debt Component in the Capital Employed Explain with the Help of an Example

...Analysis. 5. What is Capital Rationing? Section – C (Marks – 50) Attempt any five questions – 1- Explain in detail the nature and scope of Managerial Economics. How Micro Economics differs from Managerial Economics? 2. What is Empirical Production Function? Explain the optimum combination of inputs with diagrams. 3. What is Cost of Capital? Explain its structure and role in inter- national competitiveness. 4. What is Elasticity of Demand? Explain Price, Cross and Income Elasticity of Demand used in managerial decision making process. 5. What do you mean by Monopoly? How price and output is determined in short and long run in Monopoly Competition? 6. Describe the Oligopoly Model in detail. 7. Explain management of foreign exchange with special reference to India Financial Management Section – A (Marks – 25) Attempt all questions 1. Write an important condition for the adjustment of the cost of debt. 2. What does the cost of equity capital indicate? 3. Explain Capital Budgeting? What is post completion audit in the process of capital budgeting? 4. Explain Merit and Demerit of Payback Period Method? 5. What is Working Capital? State the difference between gross working capital and net working capital. Section – B (Marks – 25) Attempt all questions – 1. Define current assets and Give four examples. 2. Explain the role of ‘Operational efficiency’ in the determination of working capital......

Words: 1096 - Pages: 5

Preference Share

...Course #: Title Course 5 Hybrids (1): Preference shares Topic 1: Overview....................................................................................................................... 3 Why invest in preference shares? ........................................................................................... 3 What is a preference share? ................................................................................................... 3 What is a preference share? (cont) ......................................................................................... 4 Buying preference shares ....................................................................................................... 4 The preference share market .................................................................................................. 4 What should I look for in a preference share? ......................................................................... 5 Topic 2: Income .......................................................................................................................... 6 Dividends ................................................................................................................................ 6 When might a dividend not be paid? ....................................................................................... 7 What happens if the issuer misses a dividend payment? ........................................................ 7 Do changes...

Words: 3745 - Pages: 15

Share Capital

...QUIZ QUESTIONS SHARE CAPITAL 1. What impact does the bonus issue of shares have on the equity of a company? Why? (1 Mark) 2. Define a share option? (1 Mark) 3. Provide one reason why a company would wish to buy back its own shares? (1 Mark) 4. Distinguish between a renounceable and non-renounceable rights issue? (1 Mark) 5. What is a private placement of shares? (1 mark) 6. Name two reasons why a company could make an appropriation of its retained earnings? (1 Mark) 7. Prepare journal entries to record the following unrelated transactions of a public company: (3 Marks) a) payment of interim dividend of $50,000 b) transfer of $50,000 from the general reserve to retained earnings c) payment of 100,000 bonus shares fully paid at $2 per share from retained earnings. 8. The equity of Master Shipping Ltd on 30 June 2009 consisted of: 280,000 ordinary shares, issued at $2.40 each, called to $2.40 $672,000 Calls in arrears (24,000 shares x 80c) ($19,200) The directors forfeited the shares on which the call was outstanding. The company’s constitution provides that forfeited shares cannot be reissued and that the balance of any forfeited amounts, net of reissue costs, must be refunded to the former shareholders. Refund cheques were sent to shareholders. Prepare journal entries to record a) forfeiture of shares b) refund of forfeited amounts to......

Words: 785 - Pages: 4

... And Finally: Black Bolt | PiKA PiKA Movie (2006) | 10 Blooming Flower Flowering Jasmine Green Chinese Tea Ball Handmade In Bag Xe