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Ordinary Shares (Rights of ordinary shareholders (To share in the profits…
Ordinary Shares
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Risks of share ownership
Company default
May become insolvent and be unable to pay its debts; consequently its shares may become worthless eliminating all shareholder investment
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Corporate takeovers
Companies may be taken over or become the target of a takeover, causing a rise in share price for the target company
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Nationalisation
Railtrack was nationalised by the UK government (it was put into administration on 7 October 2001) and shareholders received only a fraction of their investment. In 2008, Northern Rock and Bradford & Bingley Building Society were both taken into state ownership, and the shareholders did not receive any compensation whatsoever, losing all of their investment.
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Market forces
Sector shares have been particularly susceptible to increased share price volatility following the 2007/08 credit crisis
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Fixed units of the share capital of a company and are the most import orate component of a company's capital structure
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Shareholders are entitled after prior charges such as preference share dividends and bank interest to all distributed profit
If liquidation should occur, the ordinary shareholders will be entitled to any residual assets but only after all other creditors have been satisified
Ordinary shares may also referred to as voting shares, although there may be some classes of ordinary share that have no voting rights, each ordinary share represents an equal share in the company. These may be designated A or B shares. Each ordinary share of the company will have the same nominal value; consequently all shareholders have parity which is directly proportional to their total holding.
Ordinary shares, having been issued initially in the primary market may subsequently be traded freely in the secondary market enabling investors to make a profit, break even or limit their loss
Ordinary shareholders will provide capital in exchange for their shares. From the company's perspective, this will be its issued share capital and forms the equity capital of the company