Equities Flashcards
(27 cards)
What two documents are required to form a company?
A) Memorandum of association
B) Articles of association
What is the main difference between private and public companies?
Private companies may have one shareholder; public companies must have a minimum of two.
What are public limited companies permitted to do?
They are permitted to sell shares to the public.
What rights do ordinary shareholders have?
They have a vote at company meetings and decide on resolutions.
What are preference shares?
Non-voting shares that pay a fixed dividend and rank ahead of ordinary shareholders.
What is one benefit of owning shares?
Dividends, which are paid every 6 or 12 months.
What is capital gain in the context of shares?
The profit made when shares rise in value, subject to capital gains tax.
What are shareholder benefits?
Additional perks offered to shareholders, such as discounted meal vouchers.
Fill in the blank: A company may issue new shares to raise capital, and existing shareholders are given the right to buy these new shares before _______.
general sale
What is market risk?
The risk of a shareholder’s value falling due to market-wide declines in equity prices.
What is price risk?
The risk that the market performs better than an individual’s shareholding.
What is liquidity risk?
The risk of shares being difficult to sell at a reasonable price or quickly enough.
What is issue risk?
The risk that the issuing company collapses, rendering ordinary shares worthless.
What is foreign exchange risk?
The risk that changes in exchange rates affect profits for companies trading overseas.
What is a mandatory corporate action?
An action mandated by the company that does not require shareholder intervention.
What is a voluntary corporate action?
An action that requires shareholders to make a decision, such as voting on a takeover.
What does it mean for a company to be listed on a stock exchange?
It means the company is going public and can raise capital for investment.
What is one advantage of a company being listed?
It can raise capital for investment.
What is a potential risk for listed companies?
They are at risk of being taken over.
What is one disadvantage of being a public limited company?
They must be more open about their business than private limited companies.
Who is responsible for allowing a company to be listed on the LSE in the UK?
The Financial Conduct Authority.
Name one of the main stock market indices in the USA.
Dow Jones, Nasdaq, or S&P 500.
Which index represents the stock market in France?
CAC 40.
What is the main stock market index in Germany?
XETRA/DAX.
