Frequently Asked Questions - Stock Market

FAQs - Stock Market

Shares are units of investment in a company that you buy to become a shareholder or a part owner of the company.
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Being a shareholder entitles you to a share of the profits of the company. As a shareholder, you are also entitled to dividends, bonuses and rights issues of companies in which you purchase shares. You can also participate in decision making at annual general meetings.

Dividends are part of a company's after tax profits that its board of directors decides to distribute proportionately to the shareholders. It could be done at different periods e.g. quarterly, half-yearly and yearly.

These are shares issued free of charge by a company to its existing shareholders usually in a mathematical proportion to the number of shares already held. What the company is actually doing is converting part of its accumulated profits and reserves into capital.

This is when shareholders of an organization are given the right to buy shares not offered to the public usually at a price below the market price. The rights are offered to existing shareholders in proportion to the number of existing shares they have. For example two for three, means that they can take up additional two shares for every three shares they already have.

An Annual General Meeting is a meeting the company holds annually after the end of the company's financial year to unveil its results for the previous year to its shareholders. It is also an opportunity for shareholders to participate in the organization's decision making by electing directors, auditors, etc.

Ex-dividend literally means without dividend. Ex-dividend price is the market price of shares after the amount equal to the recently declared dividends have been deducted.

Ex-dividend date is the date set by the stock exchange, on which the market price of a share is reduced by the dividend amount. Anyone purchasing the shares on that date or after would not be entitled to receive the upcoming cash dividend.

Normally, companies declare dividend once a year during their Annual General Meeting. However, some companies pay more than once with the payment of an interim dividend and final dividend. Bonus shares are usually issued less frequently.

This is a means that a price quoted for a share trading on a stock exchange does not include the right to take up a new stock offered or about to be offered through a rights issue. Usually the shares do not have the rights attached because they have expired, been transferred to another investor or have been exercised.

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