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The role of shareholders and why they invest - Coggle Diagram
The role of shareholders and why they invest
What are shares and Shareholders
A Share is a part of the share capital of a company, these shares are normally ordinary shares.
Why Buy Shares?
To have a right to a share of the profit made by the company, they can also re-sell the shares for a higher price
Why Sell Shares?
To raise capital for the company so the business can grow, the shareholders can also give advice
Types of Shares
Plc
Shares are sold on the Stock Exchange market. Minimum share capital is £50,000. Usually has many shareholders.
Ltd
Shares cannot be traded publicly. Usually, 1 or a few Shareholders are chosen. Shareholders can give advice and support as well as capital
A Shareholder is someone who owns the shares inside a company
What do they do for the company?
Collectively decide on organisational decisions
Vote on company directors
Decide directors salary
Checking and approving of financial statements
Factors Affecting Share Price
Demand
The demand for the product/service
If demand increases then the share price rises
If the demand decreases then the share prices will fall
What makes share prices fluctuate?
External Factors
Availability, Interest Rate, State of Economy, Customer Demographics
Internal Factors
Financial Performance, Decisions, Leadership and Attitude
Share Prices and Profit Warning
The price of shares are based on the expectation of a certain level of capital
If a business knows that its expected profits are lower than normal then they must issue a profit warining to their shareholders
Market Capitalisation
The value of a business determined by the price of its shares
Share price x number of shares issued
Divorce of ownership & control
This occurs when the shareholders of a business disagree with the decisions of the directors