Shares, Shareholders and Share Prices

Flashcards covering key concepts related to shares, shareholders, share prices, and the differences between equity and debt finance.

How often does the share price of a private company typically change?

Infrequently, usually only when the business is bought and sold or new shareholders are introduced.

How often do the share prices of public (quoted) companies fluctuate?

Every second whilst stock markets are open.

What are some factors within a company's control that influence its public share price?

Financial performance (e.g., profit growth), dividend policy, relationship with key investors, and management reputation.

What are some factors outside a company's control that influence its public share price?

State of the economy, general market sentiment, whether the company is a takeover target, and alternative investments in the company's sector.

What significantly influences the share price of a quoted public company?

Market expectations of business performance.

What is a 'profits warning'?

An unexpected warning indicating that market expectations of business performance will not be met, almost always resulting in a significant fall in share price.

What is another name for share capital in business finance?

Equity finance.

What is the main alternative to equity finance?

Debt finance.

What kind of returns do providers of equity finance typically receive?

Dividends and capital growth.

What kind of return do providers of debt finance typically receive?

Interest on the amount loaned and outstanding.

How does equity finance differ from debt finance regarding company ownership?

Equity finance provides part of the ownership of a company, while debt finance provides no participation in ownership.

Why do returns for equity finance tend to be higher than for debt finance?

They tend to be higher given higher risk.

What are common forms of debt finance?

Most commonly in the form of loans or overdrafts.