29 CHAP - 29. STOCKS AND SHARES To start a big business or...

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29. STOCKS AND SHARES To start a big business or an industry, a large amount of money is needed. It is beyond the capacity of one or two persons to arrange such a huge amount. However, some persons associate together to form a company. They, then, draft a proposal, issue a prospectus(in the name of company), explaining the plan of the project and invite the public to invest money in this project. They, thus, pool up the funds from the public, by assigning them shares of the company. IMPORTANT FACTS AND FORMULAE 1. Stock-capital: The total amount needed to run the company is called the stock- capital 2. Shares or stock: The whole capital is divided into small units, called shares or stock. For each investment, the company issues a share-certificate, showing the value of each share and the number of shares held by a person. The person who subscribers in shares or stock is called a share holder or stock holder. 3. Dividend: The annual profit distributed among share holders is called dividend. Dividend is paid annually as per share or as a percentage. 4. Face Value: The value of a share or stock printed on the share-certificate is called its Face Value or Nominal Value or Par Value. 5. Market Value: The stocks of different companies are sold and bought in the open market through brokers at stock-exchanges. A share (or stock) is said to be: (i) At premium or Above par , if its market value is more than its face value. (ii)
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29 CHAP - 29. STOCKS AND SHARES To start a big business or...

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