shares_0104

The following summary is based on the text called “What are shares?” from the website http://www.howtobooks.co.uk/family/stock-shares/. It tries to answer the previous question and introduces us the different concepts that surround shares:

What are shares? Shares are parts or fractions of a company which attribute some rights to their shareholder such as a part of the dividends generated by the company, a stake in the company’s assets, or a vote. But there are a sort of shares which don’t incorporate this last right, they are called “non-voting shares” and are traded at a lower price. Furthermore, shares have a nominal value, which in other words means the asset value of the company that the share represents. In contrast to nominal value, market value also reflects the potential earnings of the company. According to one of the rights before mentioned, shareholders receive a dividend or the non-retained part of the generated profits. Based on this concept, we can establish the cover of the dividend which is the number of times that a company could have paid its net dividend.
Finally there are two ways to measure the company’s performance: the first one is the P/E ratio (number of years of earnings per share needed to pay it) and the second one is the yield (expressed as a net percentage of the current share price).

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