What is the minimum allotted share capital for a public company?
£50,000
What is a close company?
A company under the control of 5 or fewer
What is authorised share capital?
The maximum number of shares a company is permitted to issue (based on shares nominal value).
What are the characteristics of ordinary shares?
- Right to vote.
- Right to dividends.
- Right to surplus on winding up.
When do ordinary shareholders receive dividends?
After interest and preference dividends are satisfied.
What are deferred shares?
Have one or all rights deferred.
What is a cumulative preference share?
The right to receive a dividend is rolled over to the next period.
What are participating preference shares?
Additional dividends may be paid, over and above the fixed rate, should the company be
particularly profitable.
What are convertible preference shares?
A preference share that can be converted into ordinary
shares within a certain time period
What are redeemable preference shares?
The shares can be repurchased by the company on a specific date or within specific periods. The
redemption is normally at nominal value.
What is an American Depositary Receipt?
An investment that
represents the shares in the non-US company and denominated in US dollars.
How is market capitalisation calculated?
Multiplying no. of shares in issue by market value.
What is the free-float market cap?
The market capitalisation of a company based solely on the percentage of shares freely available
for trading on the open market.
What is the calculation for dividend cover ratio?
Earnings per share/ Dividend per share
What does dividend cover ratio determine?
If the dividend is sustainable. Above 1 sustainable, above 2 comfortable.
How is holding period return calculated?
(End Val - Start Val) + Dividends received/ Start Val
How can preference shares be calculated? (Perpetuity formula)
Price = Div/ r
What is gordons growth model used for?
Factors change in dividend into the calculation. Assumes dividends grow at a constant rate (g).
How is ex-dividend share price calculated in Gordons Growth Model?
Do (1+g)/(r-g)
How is constant growth rate calculated? (gordons growth model)
g = ([Price × r] − D0 )/
(Price + D0 )
What is retention ratio?
The proportion of net income retained by the company.
How is retention ratio calculated?
Retention ratio =
(Net income − Dividends)/
Net income
How is return on equity calculated?
Return on equity =
Net income/
Shareholder funds
What is a warrant?
Securities issued by a company that give their owner the right to subscribe for new shares in the company at a fixed price (the exercise
price) on a future date (the expiry date).
