Common Share As An Investment Instrument And A Source Of Finance Essay

2021 WordsMar 7, 20169 Pages
Common Share as both an Investment instrument and a Source of Finance Share Share is sometimes referred to as stocks, equity or securities. The Company Act defines a share as ‘movable property transferable in the manner provided by the articles of the company.’(PratapGiri S. 2013, p152) The two main types of shares are common shares and preferred shares. Types of shares: 1. Common shares Common share (ordinary shares)is an equity investment which represents common ownership in a company and a claim on a portion of profits which is known as dividends. For example, purchase of Perodua shares mean ownership of the company. Investors also have voting rights which will get one vote per share to elect the board members, who are obliged to supervise the major decisions made by management. Besides, income that generated by the company would belong to the owners which are called as shareholders or stockholders. If the company goes bankrupt and liquidates, the common shareholders only have rights to company assets after creditors, preferred shareholders, and bondholders have been fully paid. 2. Preferred Shares A preferred share represents a class of ownership in a corporation that claims more on its assets and earnings than common share. For the most part, preferred shares have a dividend that ought to be paid out before dividends to common stockholders, and the shares generally do not carry voting rights. Preferred shareholders have more priority over common shareholders when it

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