Saturday, 25 May 2013

Share Capital

Share capital or capital stock refers to the portion of a company's equity that has been obtained (or will be obtained) by trading stock to a shareholder for cash or an equivalent item of capital value. For example, a company can issue shares in exchange for computer servers, instead of purchasing the servers with cash.

For example, suppose ABC Inc. raised $2 billion from its initial public offering. Over the next year, the total value of its shares increases to $5 billion. In this case, the value of the share capital is still only $2 billion because ABC Inc. had received only $2 billion from the sale of its securities to the investing public.

Dividends: transfers of assets made by a company to its shareholders
Partly-paid shares: shares on which the full issue price has not been paid, but the balance is to be paid in a series of installments or ‘calls’
Fully paid shares: shares on which the shareholders have paid the full issue price
Preference shares: shares which have a fixed rate of dividend that must be paid before any ordinary share dividends can be paid. These have higher priority in the event of the company going in to liquidation

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