Wednesday, January 25, 2012

Advantages got by the shareholders from the companies

In some ways shareholder got advantage:
1. The Company may declare a Dividend:
Usually companies provide a part of its profit to the existing shareholders by the way of dividend.The normal level of dividend ranges from 5-100%. Loss making,marginal profit making companies may not declare dividend.

2.Rise in the Share price :

As the EPS or earning per share increases the share prices also increase and the investors benefited from the stock markets.

3.The Company may issue Bonus share:
A bonus share is a gift of shares to the shareholders.If a company makes better profit in some years it provides Bonus share to the existing shareholder.The number of shares gifted is proportionate to the number of shares held.The usual ratios in which bonus is issued are 1:5,2:5,3:5 (1:2 bonus implies one share gift for every two shares held)

4.Providing Right Shares:
If a company wants to raise more funds it is obliged to offer these instruments first to the existing shareholders.This offer is called an offer on right basis.


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