What is a bonus issue?
When a company issues free shares to existing shareholders, funded from share premium or retained earnings
What is a rights issue?
When a company offers existing shareholders the opportunity to buy additional shares, usually at a discount, to raise new capital
What are ordinary shares and what rights do they give shareholders?
Ordinary shares represent ownership in a company. They give shareholders voting rights and the right to receive dividends, which are not guaranteed and are paid at the company’s discretion
What are preference shares and what rights do they give shareholders?
Preference shares are shares that entitle shareholders to a fixed dividend before ordinary shareholders. They don’t usually have voting rights
When calculating goodwill, what figures are used to determine NCI?
Share capital + retained earnings of the subsidiary at acquisition
What are redeemable and irredeemable preference shares?
Redeemable - shares that the company will repay at a future date and are treated as debt
Irredeemable - shares that are not repaid and are treated as equity
What does the gearing ratio show?
The proportion of a company’s finance that comes from debt compared to equity.
Lower is better (less risk)
What does interest cover show?
The ability of a company to pay its interest from operating profit.
Higher is better (safer)
What does the current ratio show?
The ability to pay short-term liabilities using current assets.
Middle is better (too high is inefficient but too low is higher risk)
What does the quick ratio show?
The ability to pay short-term liabilities without relying on inventory
Higher is better
What does ROCE show?
How efficiently a company generates profit from its capital employed
Higher is better
What does asset turnover show?
How efficiently a company uses its assets to generate revenue
Higher is better
