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LIMITED VOTING SHARES

 

 

1) What are limited voting shares?

Limited Voting SharesThe limited voting shares restrict the decision making over the direction of the company in which they participate as Partners, as certain specific features of minor character, as well as administrative and operative; but in Exchange they are rewarded with a higher, fixed and priority over ordinary shares financing revenue, since they are part of preferred shares.

2) What advantages do these shares give to the beneficiary?

The limited voting shares allow the beneficiary to obtain the best revenue according to the common shares, which are subjected to the risk of the business and of the market. However, the fact that a revenue fixed interest is assigned it can be disadvantageous when the business is much lucrative and higher to the expected.

3) What advantages do the limited voting shares give to the issuer?

These shares allow the issuer to obtain funds through the sale of his participation in the business, without losing the control of the company neither in the decision making since it is limited to certain areas less strategic and his voice may be listened but not necessarily assisted.

4) Who are the most interested in acquiring these shares?

Investors are the most interested in acquiring the limited voting shares, as well as the small shareholders who, as much as they want they cannot get enough participation to decide with their vote on the questions made during ordinary or extraordinary board meetings.

5) External links:

Limiting voting rights is familiar work for gop
We Should Limit Voting Rights To Intellectual Ability

PREFERRED SHARES

 

 

1) Preferred shares, definition:

Preferred SharesFirstly, we must define shares as variable rent instruments, which are issued by some companies and from which there are two types: the ordinaries and the preferred shares. The latter differ from the ordinaries in many aspects, which will be seen in the following point of this article. As they are called, the preferred shares give their users privileges or preferences over the others, and they are, in case of dissolution of the commercial partnership, the first to collect as they are part of the financing asset of the company and they are part of their capital. Therefore, those who own preferred shares have certain advantages over the other shareholders of the company, these, in many cases, issue preferred shares as a plan in case they do not want to increase their ordinary shares portfolio.

2) Differences between the preferred and the ordinary shares:

As mentioned before, the preferred shares have advantages over the ordinary ones and the main differences over the former are on the financing aspects. Firstly, the preferred shares always pay a fixed dividend over the ordinary ones which may be variable depending on certain financing features. Another difference with the ordinary ones is that the preferred fixe from the first time their dividend rate, i.e. at the issuance moment. Moreover, the preferred shares may be bought again by the company at a specific time, while the ordinary ones are issued for ever. However, by paying a bonus these shares may become ordinary ones and they are called the convertible preferred shares.

3) Payment of dividends in preferred shares:

The preferred shares dividends may be of two types, the first of them depends on its nominal value applying a fixed percentage to it; the second type of dividends that pay the preferred shares is called floating and it depends on certain types of interests, at standard rates taken as references and to which a difference is added. It could happen that the preferred shares, being preferred over the ordinaries at the time of collecting dividends the ordinary shareholders do not collect and the preferred ones do. These dividends are paid to preferred shares holders in the cases that the company get benefits throughout an economic exercise and after the board has voted its distribution and up to a specific amount.

4) Preferred shareholders performance in company issues:

In some cases the companies give certain voting power to the holders of the preferred shares but only with limited voting possibilities for certain companies’ issues. These are stated in the contract of each partnership and as compensation to the holders of these types of capital value of the company, the shares of this type of voting rights have a preference over the common and the ordinary ones so they are preferred shares. There are also those called guaranteed shares, that are preferred or ordinary ones guaranteed by a third partnership in question in charge of supporting them.

5) Advantages of issuing and purchasing preferred shares:

The principal advantage for the company that issues the preferred shares is getting a very important financing source in the long term with relative short costs. For example, in the case of banks, the issuing of these shares is very efficient method to get resources that then are reflected in their balances, besides improving percentages for the installing rates. For those buying preferred shares, they will find advantages of revenue higher than the floating debts or even promissory notes of the company supposing similar risks.

6) What happens when dividends of preferred shares are not paid in exercise?

Another advantage of these shares for those acquiring them is that in case those dividends are not paid because of low financing benefits these are annually accumulative. So, and as it was mentioned, there is all the time the possibility of turning these preferred shares into ordinary ones, in the case that the holder says to, because of the constant accumulation of non- paid dividends. In certain moment of the world economy, only the companies and the big capitals could acquire the ordinary shares and even preferred ones, but lately families have entered into this market as securities of big national and multinational companies’ holders. For them it is a way of saving and future capitalization thinking of their children and generations that will come.

7) Related video:


8) External links:

S&P U.S. Preferred Stock Index Fund
Preferred Stocks: Closing Table

COMMON SHARES

 

 

1) Definition of common shares:

Common SharesShares are participation given to third persons over company’s capital and ownership, aiming to obtain money and financing their projects, giving partial rights in decision making and in dividends gain. Common shares also called ordinary shares differ from preferred shares in that there is no guaranteed rights to dividends or annual utilities, because it belongs to the company’s board, stating if they are distributed or re invested, and the percentage distributed. According to voting capacity and decision making of common shares, it will depend on the amount of shares owned, the relevant percentage and significant over the total capital, if the board representation is required to the minority shares and they are not allowed to attend individually, and there is no obligation to assist them by the majority.

2) Classification:

Common shares may be classified according to the process in which they are authorized, issued and located in public. The authorized common shares are the registered number and approved to be sold, the issued common shares are the ones being sold and distributed initially to the public, the circulating common shares are the ones owned by the public and investors because the company may buy again on their behalf, and the Treasury common shares are those bought by the company again.

3) Advantages of common shares for the issuer:

Common shares are a financing alternative for the companies, additional to the bank loans that do not affect the indebted capacity; they do not require monthly money contribution, but only of annual dividends distribution, if the administration and the board decide to. Therefore, are an easy alternative to obtain capital for the business growth and strength.

4) Disadvantages for the issuer:

When the common shares represent the important percentage, giving control to who possesses over the business, which generates important utilities every year, at this moment shares may be a financing mean and more expensive money source than enquiring to the bank.

5) Advantages of common shares for the beneficiary:

Common shares are interesting, attractive and new medium of money investment at long term, leading to higher revenues rather than normal deposits of the financing system, due to the higher risk and proper instability of supply and demand, and of generating proper utilities to each business. With common shares you may obtain double benefits, in the annual utilities proportional distribution and the price rise and those shares valuation, as a result of the stock market price.

6) Disadvantages for the beneficiary:

Common shares have the disadvantage of not having guaranteed the utilities and the revenues, because if you can guarantee that the price valuates the shares, neither may you require utilities generation in the business or that the utilities are distributed.

7) Characteristics:

Common shares are securities which give rights to the beneficiary over one proportional part of the business, its utilities and decisions, with limited responsibility as they do not go over the other’s assets. The common shares may be freely negotiated through the stock and its intermediaries, selling and transferring the rights to third people or its re sale to the same issuer company. The terms are indefinite and it depends on the existing issuer partnership. The benefits do not guarantee their success, neither its value nor revenue.

8) Differences between common shares and preferred:

Common shares have voting rights whereas the preferred shares do not. As a consideration, the preferred shares have a fixed dividend distributed periodically, and the common ones do not guarantee dividends delivery neither amount to distribute.

9) Difference between common shares and bonds:

Common shares represent property over the assets of the company while the bonds are just financial instruments used as investments to obtain the agreed revenues in a definite and finite time. As for the common shares, the issuer gives a proportional part of their rights over the business, and the bonds issuer gives parts of their debt looking for financing.

10) Related video:


11) External links:

Common Shares: What they Are
Share Information

INVESTMENTS

 

 

1) Investments:

In this site you will find all kind of information related to the investment world, starting by its definition and then explaining in detail the types of existed investments, those well known and not so well known. This site is not responsible for the use of information from the user. Information about different types of investments has been compiled according to many writers, and subjective opinions based on personal experiences as well.

Investment

2) Investments, definitions:

Investments are putting capital into any civil or business activity, for a certain time aiming to get an economic profit. In business, investments are all kinds of purchases in order to keep the company working or to enlarge its productive equipment. Global investments are those investments made in one country, as one of the principal political economy variables and of its process of development. The main objective of investments policy is the composition of social fixed assets, technical capital, and of technicians. As for underdeveloped countries, they need investments from foreign capital in order to develop its economy. It is necessary to distinguish between gross investment, which is the total amount of investment in a specific time, and the net investment, same as the gross investment minus the part dedicated to the maintenance and renewal of fixed capital. If the results of net investments are negative, it is said that there is a divestiture process.

Dollar investment
3) What important features do the word investments involve?

Related financial resources: the investments are formed by flow of financial resources. In this commercial or business activity there are two flows of opposite sign:
A) The real flow (inflows and outflows of real assets) and the financial or money flow composed by incomes (collections) and outflows (payments) of financial goods (money).
Certainty in the initial payment and uncertainty as to a possible gain in future profits. The investments always have the risk factor. Therefore, we must estimate future disposable income.
There is no quote to the object in which the investment is materialized: the investment concept is valid only if there is initial payment, the expectation of receiving future disposable income and a specific period of time, even if it is a real estate investment or on financial assets, or any other, there is no quote about the object of our investment though.

4) Investment elements:

Many writers coincide in considering the following as investment elements:
A) The party that purchases or invests (company or individual)
B) Its object (for example: when a personal property is purchased for the company)
C) The cost of initial investment. Initial payment for the project.
D) The takings and payments of investments during its useful life.
E) The periods when the project will be profitable.
F) The residual value at the end of the investment.

5) Investment classification:

A) Investments in fixed assets: it measures the company expenses on the physical structure: the business or company so-called plant (e.g.: factories) and on the equipments (fixed assets or personal properties)
B) Investments according to the function of the endeavor: renewal, enlargement, improvement or strategy.
C) Gross and net investments: capital goods (except land) could fall into decay or reduce in value due to its use or time. This consumption is known as depreciation. As regards a specific amount of investment on the economy, one part replaces the expended capital and the other part increases the capital goods. The total level of investment is called gross investment, whereas the net investment is due to increase the amount of capital goods.
D) Related to the party that makes the investment:
Private or public individual
E) According to its intention:
F) Temporary investments: are bonds or other drafts which are easily sold and over which there is an intention of cashing them within the year (example of these investments: quoted shares, debt securities or capital securities, futures contracts with liquid markets, etc)
G) Permanent investments: they are bonds and other drafts over which the investor’s intention is to hold them for more than one year (example of these investments: assets on controlled entities, assets on related partnerships, other permanent investments)
H) According to its profitability:
Fixed income investments: they are bonds or drafts which are always connected with a fixed profitable (eg: fixed –term deposit), and allows the investor to determine its value at a certain time.
Variable income investments: they are bonds or drafts connected with a yield whose amount depends on the value of the factor used for its establishment.
I) according to the control over the issuer, they are classified as follows:
– Investments of controllers: they are those investments held by an investor who acts as a controller over the issuer.
– Investments of non-controllers: they are those held by an investor from an economic sector who does not act as a controller.

6) Selection criterion of the investments:

The Selection criterion of the investments can be classified in two groups:
A) Static criterion: the selected investments which do not consider the time, that is to say, the cash flows are considered and operated with them as if they were amounts of money, independently from the moment when they are cashed or paid (the concept of financial capital is not used). They are simple methods, but this simplicity makes them work simply in practice in order to have a global view on the investments. It is essential to be careful with its usage due to its limitations. Most common criterions are:
– Method of net cash flow
– Method of recovering term
– Method of profitable account rate

B) Dynamic criterions: the concept of financial capital is used (besides taking into account the currency, the moment when the resources are purchased or sold is also considered). In order to be compared, its capitalization and update or discount, is also taken into account.
These selection models of investments are much more precise as they take into account factors such as inflation, taxation, and others. The most commonly used are:
A) Pay back B) Net current value criterion (V.A.N.), C) profit rate criterion (T.I.R.)

7) Macroeconomic factors:

A) Inflation: it is the devaluation of the currency over time.
B) Taxation: it is the fiscal laws and its direct effects, such as tax payment which has a great importance to investments. When investments are valued and analyzed, it must be taken into account that the negative flow represents the tax payment (and so tax relief), this is one of the factors upon which the entrepreneur may act by means of amortizations, financial resources, etc.
C) Technical progress: it is of great importance to study the investment processes. Its wrong estimation may cause the invested object obsolescence before the stated time.

8) The costs on our investments:

It is of great importance that we analyze in depth the costs under which we will go into as a result of our investment.
A) Market price – Cost = Result   B) Cost + Benefit margin = Market price
Cost is synonym of expense (consumption or transformation). This expense is related to a specific objective (which differs from loss).  When it comes to cost, we mean all the investments made in order to purchase a product or to provide service, as well as to assign them to partial investments (when we have different kinds of costs).
When analyzing the different investments that we had in portfolios, it is important that we could define which are going to be their average costs.

9) Profitable investments:

Before getting deeply into this website by being informed about different kinds of investments, I would like to talk about their profitability. Most people think that the more money they invest the bigger profit they will get. However, it must be taken into consideration that the profit is measured in terms of average, and so it is not proportionally direct to the invested money, which must not be always like that. There are some people who invest little money and get extraordinary profits, and also those who invest big amounts and they lose everything. So, do not be discouraged if your capital is small since there are other factors which are of great importance such as risk, good ideas, business administration and others.

10) The value of good ideas:

Despite having a big initial capital at the moment of the investment is important, good ideas may also be even more important. These ideas are unlikely to be found in forums or website since they would not be good ideas any longer and that business would become massive to such extend that everybody would invest in that “good idea”. In this website you will be able to be informed about the different kinds of investments, this is just a guide which explains what investments are. We hope you find it useful in order to get an extra income and so that you could take an early retirement.
Remember: a good idea may be materialized in thousands or millions of dollars, but, in order to get it, we must think differently to the majority, we must analyze possible investments from a different point of view and we must fulfill it confidently.

11) Related video:

12) External links:

Investment planning tips with guide to choose best investment
Definition of investments
Investment – Dictionary reference