Introduction of equity shares pdf

It has experienced a structural change with the setting up of sebi, opening up to the foreign investors, establishment of the nse, initiation of. Price to earnings ratio pe is short for the ratio of a companys share price to its per4. The holders of equity shares are members of the company and have voting rights. The ordinary shareholders have voting rights in the meetings of the company.

The middle market price of equity shares means the middle market quotation for those shares as derived from the daily official list of the london stock exchange on the relevant date. The market in which shares are issued and traded, either through exchanges or overthecounter markets. The equity market plays a significant role in the economy. Dividend payable to equity shareholders is an appropriation of profit. Though investors can sell their shares and transfer ownership to another investor but the capital of the company remains untouched. An actual sale transaction of shares between buyer and seller is. Equity gives the investors a right to ownership in the company. I have mentioned about the most popular shares which are as follows.

Equity sharing became desirable in the united states when in 1981 section 280a of the internal revenue code allowed mixed tax use of a single property for the first time permitting the occupier to claim principal residence tax deductions and the investor to claim investment property tax deductions. Economic indicators industry life cycle analysis, competitive analysis of industries etc. In case of profits, equity shareholders are the real gainers by way of increased dividends and appreciation in the value of shares. Cs executuve accounts valuation of shares day 1 by raj awate duration.

Preference shares have the characteristics of equity as well as debt instrument. Exploring the new investment world of reit reit regulatory landscape introduction the reit regulations came into force in september 2014. Share valuation 2 acquisition transfer of shares in an indian company by a nonresident. They are entitled to receive dividend as are declared by the board of directors. The liquidity of markets is a major consideration as to whether a share is able to be sold at any given time. The discount prohibition does not apply to an open offer at a discount of more than 10% if the terms of the offer at that discount have been specifically approved. The case for promoting equity in developing countries 19 4. If we divide that equity value by the number of shares outstanding we get the book value per share for the company. They are the shares which do not enjoy any preference regarding payment of dividend and repayment of capital. The share capital may be altered or increased, subject to certain conditions.

Introduction the cost of capital is the companys cost of using funds provided by creditors and shareholders. Requirements for equity accounting are established by 8 business. He advised the investors to buy shares of a growing company of a growing industry. Plain and simple, equity is a share in the ownership of a company. Various types of equity share capital are authorized, issued, subscribed, paid up, rights, bonus, sweat equity etc. Equity share is raised to finance any public company. Another method of valuing shares is based on earning per share eps or net profit per equity share multiplied by the price earning ratio pe ratio. Equity shares are the main source of finance of a firm. The share price is determined by the supply and demand for a particular companys shares. The equity summary score is provided for informational purposes only, does not constitute advice or guidance, and is not an endorsement or recommendation for any particular security or trading strategy. Listed companies are those entities that have offered some part of their equity to public investors.

Inspire academybest cs foundation executive coaching classes in pune cmacs coaching classe in pune 10,907 views. An equity market, also known as the stock market, is a platform for trading in company shares. It has experienced a structural change with the setting up of sebi, opening up to the foreign investors, establishment of the nse, initiation of the screen based trading. Various types of equity capital are authorized, issued, subscribed, paid up, rights, bonus, sweat equity etc. The redeemable preference shares can be redeemed by a the proceeds of a fresh issue of equity shares preference shares, b the capitalization of undistributed profit i. Benefits of equity share investment are dividend entitlement, capital gains, limited liability, control, claim over income and assets, right shares, bonus shares, liquidity etc.

The capital received by a company through issue of equity shares is permanent capital. Share capital of a company refers to the amount invested in the company for it to carry out its operations. Equity shareholders are the actual owners of the company and they bear the highest risk. Investment fundamentals an introduction to the basic. Own shares shares acquired by the issuing limited liability company. Valuation of shares lecture 1 by cacma santosh kumarfree. Valuation of shares intrinsic value method, yield method and fair value method. Here are some major cons of equity shares from both the views.

Disadvantages are dividend uncertainty, high risk, fluctuation in market price, limited control, residual claim etc. A companys cost of capital is the cost of its longterm sources of funds. Stock represents a claim on the companys assets and earnings. An introduction to short selling hedge fundamentals. It is the place where buyers and sellers meet to trade in listed companies. On the other hand, equity shares only represent ownership in the company. This demand coupled with advances in trading technology has opened up the markets so that nowadays nearly anybody can own equity. When a company floats on the stock market the shares will be sold at a certain price, which represents the value placed on the business. Equity shareholders do not enjoy any preferential rights with regard to repayment of capital and dividend. Introduction fundamental analysis is the examination of the underlying forces that affect the well being of the. If promoters own 5100 of the 0 shares issued by a company, they are said to have a 51% stake, or a majority stake. Buy shares by diversifying in a number of growth companies operating in a different but equally fast growing sector of the economy. The equity summary score is provided by thomson reuters starmine, an independent company not affiliated with fidelity investments.

Whether you say shares, equity, or stock, it all means the same thing. An introduction to stock valuation brian donovan, cbv. Earnings and earnings expectations can be potent drivers of equity prices. Equity shares can be issued without creating any charge over the assets of the company. The purpose was to set a regulatory regime, which could alleviate the debt and the liquidity crisis plaguing the real estate industry. Introduction every company limited by shares must have a share capital. Over the last few decades, the average persons interest in the equity market has grown exponentially. An equity share, commonly referred to as ordinary share also represents the form of fractional or part ownership in which a shareholder, as a fractional owner, undertakes the maximum.

Investment fundamentals aims to demystify the process of using money to make money and give you a basic introduction to the key investment topics. Preference and equity share difference mba lectures. Equity shares offer many benefits to companies as well investors. Equity shares do not create any obligation to pay a fixed rate of dividend. As you acquire more equity, your ownership stake in the company becomes greater. This chapter deals with the accounting for share capital of companies. Factors affecting the share price when you have more buyers than sellers for a particular companys shares, share prices usually rise because these shares are in. The pros and cons of equity shares are from the perspectives of an investor and a company. As you acquire more stock, your ownership stake in the company becomes greater. As equity capital cannot be redeemed, there is a danger of over capitalisation. The following paper provides an introduction to short selling and how it is regulated to help ensure investor protections and prevent abuse. The importance of asset allocation and the different asset classes.

Despite their popularity, however, most people dont fully understand equity. Equity represents a claim on the companys assets and earnings. The pe ratio is really the converse of the normal rate of return applicable to the company. Equity shares are the vital source for raising longterm capital. Introduction the indian stock market has gained a new life in the postliberalization era. Delivery of shares must be made in dematerialized form.

The equity share capital cannot be redeemed during the life time of the company. The share price is the price at which a particular share can be bought or sold. Equity shareholders are the real owners of the company who have the voting rights. There is great difference between preference shares and equity shares in terms of characteristics and conditions. It provides perpetual capital ordinary common shares and in some countries perpetual preference preferred shares exist and longterm capital in most countries the definition of preference preferred shares.

Maximum amount of shares that can be brought back in a financial year is twentyfive percent of paid up share capital and free reserves where paid up share capital includes equity share capital and preference share capital. For example, if a company issues 10,000 equity shares of face value rs. They are the form of fractional or part ownership in which the shareholder, as a fractional owner, takes the maximum business risk. Equity sharing in different countries united states.

Technical guide on share valuation corporate valuations. It is generally the main source of finance for public companies. Ascertainment of the premium at which shares are to be issued. Some of the basic differences between preferred and equity shares are given. These are shares of company and can be traded in secondarymarket. So if 10 million shares are issued in united conglomerates at a price of. The value of equity shares are expressed in terms of face value or par value, issue price, book value, market value etc. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Also known as the stock market, it is one of the most vital areas of a. The objective was to monetise existing unsold inventory of real. Benefits and disadvantages of equity shares investment. If only equity shares are issued, the company cannot take the advantage of trading on equity. Introduction the methods used to analyze securities and make investment decisions fall into two very broad categories. Getting ready to invest, including goal setting and understanding the impact of cost and risk.