Unit5CompanyFinancialReport.pptVIP

* * * * * * * * * * * * * Shareholders’ equity Ordinary shares （普通股） Ordinary shares are the main risk bearing shares of the company because: They rank last if capital is ever returned, Only receive a return (dividend) if there is profits and cash available to justify it all other claims on the business are paid before ordinary shareholders. BFA103_05 * Shareholders’ equity Ordinary Shares Ordinary shareholders can often have a higher share in profits. The trading of ordinary shares is usually done in formal market place known as a Stock Exchange BFA103_05 * Shareholders’ equity Companies may also issue preference shares（优先股）. BFA103_05 * Shareholders’ equity Preference shares （优先股） Preference shares are entitled a fixed rate of dividend before ordinary shareholders receive any as long as there are sufficient retained profits （留存利润） available. BFA103_05 * Shareholders’ equity Preference Shares The rate of dividend is usually indicated in the title of the share. Have preference over ordinary shareholders when capital is returned on winding up. They usually have no voting rights （投票权） Preference shareholders take less risk so in the long-term they will expect less return. BFA103_05 * BFA103_05 * Shareholders’ equity An established company may raise further capital with a rights issue of shares to its existing shareholders (these rights may be sold if the shareholder does not want to buy more shares) To make these issues attractive, shares are usually offered at a price below the current market price. Rights issues ensure that the ownership share of existing shareholders is not diluted. BFA103_05 * Shareholders’ equity Companies may also issue free bonus shares to their shareholders. Are shareholders better off after such an issue? No! shareholders’ equity (their claim on the business) does not change because while capital increases, a reserve or retained profits decreases. The net assets of the company does not change. while each shareholder will hav