Equity
The corporate form of organization
Equity
Preference Shares
Dividend Policy
Analysis
Influence of corporate law
Use of the share system
Development of a variety of ownership interests.
Submit articles of incorporation
Recognizing the company as a legal entity.
Large number of units or shares.
The privilege is referred to as a share right or warrant.
Each share is personal property of the owner, who may dispose of it at will.
Ordinary shares represent the residual corporate interest that bears the ultimate risks or loss and recives benefits of success.
Preference shares, the shareholder may sacrifice certain of these rights in return for other special rights or privileges.
Residual Interest in the assets of the company afeter deducting all liabilities
Often referred as shareholder´s equity,or corporate capital
Subclassified on the statment of financial position into
Share Capital
Share premium
Retained earnings
Accumulated other comprehensive income
Treasury shares.
Non-controlling interest
Special class of shares that possess certain preferences or features not possessed by ordinary shares.
Preference as to dividends.
Preference as to assets in the event of liquidation
Convertible into ordinary shares.
Non-voting.
Features
Cumulative Preference Shares
Participating preference shares
Convertible Preference Shares
Callable Preference Shares
Redeemable Preference Shares
If the corporation fails to pay a dividend in any year, it must make up in a later year before paying any dividends to ordinary shareholders.
Share rentability with the ordinary shareholders in any profit distributions beyond the prescribed rate.
Allow shareholds to exchange preference shares for ordinary shares at a predetermined ratio.
Permit the corporation at its option or redeem the outstanding preference shares at speciied future dates and at stipulated prices.
Have mandatory redemtpion period or a redemption feature that ussuer cannot cantrol.
Types
Cash dividends
Property dividends.
Liquidating dividends
Share dividends
Not based on retained earnings, to the shareholders so that they will not misunderstand its source.
Board directos votes on the declaration.
Dividends payable in assets of the corporation other than cash.
par value of the shares issued as a dividend from retained earnings to share capital.
Return on ordinary share equity
Payout ratio
Book value per share
Measures profitability from ordinaryu shareholder´s viewpoint.
Ratio of cash dividends to net income.
The amount each share would receive if the company were liquidated on the bases of amounts reported on the statement of financial position.
This ratio shows how many dollares of net income the company earned for each dollar invested by the owners.
If preference shares are outstanding, this ratio equals cash dividends paid to ordinary shareholders, divided by net income available to ordinary shareholders.
