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Benefits Of Investment In Ordinary Share Of A Quoted Company

Updated on March 1, 2015

BENEFITS OF INVESTMENT IN ORDINARY SHARE OF A QUOTED COMPANY

Shares are any units of equal value into which a company is divided and sold to raise money, in which the owners of the shares receive part of the company’s profit. Investment is buying property shares in the company, bank or any profit making business organization in the hope of making profit of the shares bought.

Ordinary share capital are shares, which when bought by its holders, they become the ordinary shareholders. This set of people form the founding members of the company.

Quoted companies are companies, which are registered and listed in the stock exchange market. This is a market where shares, bonds, debentures, stock and other monetary securities are bought and sold. The personnel that help investors to buy shares are called “ stock brokers”. They are paid some commission, which is forced, by the stock exchange market. Also, there are some agents that help their principal. The commission is an agreement between the agents and their principal. The benefits accruable to investors who have invested in ordinary share capital are as follows:

Firstly, the ordinary shareholders’ dividend is not fixed. That is, when dividend is declared after the accounting period the shareholders to be paid are the preference shareholders, and remaining profit taken aside. Then the remaining amount of money is shared among the ordinary shareholders of the company. Secondly, the ordinary shareholders have voting rights in the company. Most often than not, the ordinary shareholders buy more units of shares than the preference shareholders since they are the founding members, they have more voting rights and can vote and be voted as the Directors and Managers of the company.

Thirdly, although, they have more voting rights and make more money than the preference shareholders they are not affected directly when there is liquidation, insolvency, or breach. They only close the amount they have invested in the company. Nobody is going to sue them, instead the company is sued and the money realized from the sale of the company assets, is used to settle its debts.

Lastly, the ordinary share capital holders do not partake in the running of the business, because it’s totally left in the hands of the board of Directors and Managers who are professionals. Thus, they have a joint business and can still have their own personal business in which they are the proprietor, therefore, they stand in the gap of killing two birds with one stone. In conclusion, in view of the fact above, investing in an ordinary share of quoted company is of immense benefit. Whoever invest in it would not have himself to blame but sky is the limit. It is a short cut to become millionaire.

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