share value Flashcards
A falling share price indicates what?
Excess supply.
A rising share price indicates what?
Excess demand.
Describe the share price of a private company:
Initially set by shareholders when people are invited to buy shares, there is no active market.
Describe the share price of a public company:
Highly transparent, it changes in real time, all trades are disclosed.
What is Market Capitalisation?
The total market value of issued share capital.
share price x number of shares in issue
What factors in a company’s control can influence share price?
Business performance, reputation, relationship with investors.
What factors outside a company’s control can influence share price?
The state of economy, if the company is a takeover target, there are similar alternative investments.
What is share capital?
Money raised from selling stock, returned in dividends and part-ownership of a company. Usually in a PLC and is a long term source of finance.
What is debt?
Money raised from loans -usually from a bank. It can be repaid with interest over a short or long-term period. Can be repaid with assets so is important to have limited liability. The creditors have no say in how company is ran, usually LTDs use debt.
What is the issuing shares cash flow?
1) Company issues new shares
2) Shareholders by new shares
3) More cash, more shareholders
What are the 2 methods of issuing shares?
Flotation- Share is issued on stock exchange, aims to raise more capital but is a costly process.
Rights issue- Fresh shares are issued to existing shareholders. They have a right to subscribe for these shares.
What are the 2 methods of issuing shares?
Flotation- Share is issued on stock exchange, aims to raise more capital but is a costly process.
Rights issue- Fresh shares are issued to existing shareholders. They have a right to subscribe for these shares.
What are some benefits and drawbacks of share issue?
Can help raise capital and expand business but means ownership is shared and company could become a potential takeover target.
