What is shares and dividend ?

Elearning4more - March 13, 2019


The owner of shares in the corporation/company is a shareholder (or stockholder) of the corporation. A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represent the capital of a company, which may not reflect the market value of those shares.
The income received from the ownership of shares is a dividend. The process of purchasing and selling shares often involves going through a stockbroker as a middle man. There are different types of shares such as equity shares, preference shares, bonus shares, right shares, employees stock option plans and sweat equity shares.
In simple means, 
There are different types of shares, and you must be well familiar with all of them. But first let's talk about shares. You may define shares as a smaller part of the capital that is known as “Share” and a person, who owns shares is known as the shareholder. We may also define shares as one of the units in the company into which the total capital of the company is divided. 
Justice Farewell defines Share in the following words “A share is the interest of the shareholder in the company. It is measured by the sum of money for the purpose of liability in the first place and of interest in the second place”. Holders of the shares are called shareholders or members of the company.
  • The share of a company shall be a moveable property. It is transferable in the manner provided by the articles of the company.
  • The share capital is non refundable except in the case of winding up and reduction of capital.
  • Each share in a company shall have a distinctive number.
Types of shares


Equity Shares

Equity shares are also called ordinary shares. The holders of equity shares are the real owners of a company. The ordinary shareholders have voting rights in the meetings of the company. They are entitled to receive a dividend as are declared by the board of directors. The equity share capital cannot be redeemed during the lifetime of the company.

Preferences Shares
Preferences Share as the name suggested, it has certain preferences as compared to other types of shares. The main preferences of these shareholders over others, in brief, are as under:-
The first preference is for compensation of dividend. Whenever the company distributes profits, the dividend is first paid on preferences share capital.In case of winding up the company, the preferences shareholders have a prior right in regard to repayments of capital.
Ordinary shares are the most common type of shares and are standard shares with no special rights or restrictions. They have the potential to give the highest financial gains, but also have the highest risk. Ordinary shareholders are entitled to voting rights, however, they are the last to be paid if the company is wound up.

 Non-voting ordinary shares carry the same conditions as ordinary shares except with regards to voting rights. Shareholders may have voting rights under certain circumstances or they may have no voting rights at all.

 Preference shares typically carry a right that gives the holder preferential treatment when annual dividends are distributed to shareholders. Shares in this category receive a fixed dividend, which means that a shareholder would not benefit from an increase in the business' profits. However, usually they have rights to their dividend ahead of ordinary shareholders if the business is in trouble. Preference shares carry no voting rights.

 Cumulative preference shares give holders the right that, if a dividend cannot be paid one year, it will be carried forward to successive years. Dividends on cumulative preference shares must be paid, despite the earning levels of the business, provided the company has profits that can be distributed.

Non-cumulative preference shares. In this type of preference shares, the holders do not have any claim regarding the amount outstanding of a dividend. They are paid a dividend if a company earns a profit.

Convertible preference shares. The convertible preference shares are those which the holders can convert into equity shares at a specified period of time. The right of conversion is to be authorized by the Articles of Associations of the company.

 Redeemable shares come with an agreement that the company can buy them back at a future date - this can be at a fixed date or at the choice of the business. A company cannot issue only redeemable shares, so they must ensure that they also issue non-reedeemable shares.

Definition of 'Dividend'



Definition: Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. Dividends can be issued in various forms, such as cash payment, stocks or any other form. A company’s dividend is decided by its board of directors and it requires the shareholders’ approval. However, it is not obligatory for a company to pay dividend. Dividend is usually a part of the profit that the company shares with its shareholders. 

      Click on a link below to Read interesting topic English and Hindi

 

      नीचे दिए गए लिंक पर क्लिक करें पढ़ें दिलचस्प विषय अंग्रेजी और हिंदी

 

 

 




 

 

 





 


 

























   



Tags:

Post a Comment

2 Comments

  1. Especia associate llpMarch 25, 2022 at 3:28 PM

    Thanks For Sharing. Especia Associates provides ESOPs & Sweat Equity Valuation Services. ESOPs or Employee Stock Option Plans are the most imperative type of compensation for the key employees of the organization. From a start-up’s point of view, it keeps up liquidity, and from an employee's viewpoint; it is a reward for faithfulness towards the organization. if you need ESOPs & Sweat Equity Valuation Services call at 9310165114 or visit us ESOPs & Sweat Equity Valuation Services

    ReplyDelete
  2. HisabkitabSeptember 19, 2023 at 1:49 PM

    Thanks For Sharing. In today's fast-paced business landscape, efficient financial management is crucial for success. Accounting software has emerged as a game-changer, revolutionizing the way businesses handle their finances.

    ReplyDelete