Definitions [7]
The shares of different companies can be bought or sold in the market through the stock exchange.
The value of a share printed on the share certificate is called its Nominal Value, or Face Value, or Par Value.
A share is the smallest unit of the capital of a company. The capital of a company is divided into small equal parts, each of which is called a share.
The total amount of money needed to run the company is called the capital.
The annual profit distributed among shareholders is called a dividend.
A shareholder is a person who owns one or more shares of a company. A shareholder is a part owner of the company in proportion to the number of shares held.
A stock exchange is a place where the buying and selling of shares takes place. It is also known as the share market or capital market.
Formulae [7]
Sum Invested = Number of shares × Market Value
\[\text{Rate of Return}=\frac{\mathrm{Dividend}}{\text{Market Value}}\times100\]
Dividend (Income) = Face Value × No. of shares × $$\frac{Rate\ of\ dividend}{100}$$
$$\text{No. of shares} = \frac{\text{Investment}}{\text{Market Value of 1 share}}$$
$$
\text{No. of shares} = \frac{\text{Total Income}}{\text{Dividend on 1 share}}$$
\[\text{Rate of Return}=\frac{\text{Annual Income}}{\text{Investment}}\times100\]
Total dividend earned = No. of shares × rate of dividend × N.V. of a share
Key Points
| Term | Short Explanation |
|---|---|
| Share | The smallest unit of a company’s capital. |
| Dividend | Part of the company’s profit is distributed per share, calculated on Face Value. |
| Stock Exchange | Market where shares are bought and sold (e.g. BSE, NSE). |
| Market Index | Indicator of stock market performance (SENSEX – BSE, NIFTY – NSE). |
| Face Value (FV) | Value printed on the share certificate (also called par value). |
| Market Value (MV) | The price at which a share is bought/sold in the market. |
| MV > FV | Shares issued at a premium. |
| MV = FV | Share issued at Par. |
| MV < FV | Shares issued at a discount. |
| Sum Invested | Total amount spent to buy shares. Formula: Number of shares × MV |
| Rate of Return (RoR) | Percentage return on investment. Formula: (Dividend ÷ MV) × 100 |
Important Questions [2]
- How Much Should a Man Invest in Rs. 50 Shares Selling at Rs. 60 to Obtain an Income of Rs. 450, If the Rate of Dividend Declared is 10%. Also Find His Yield Percent, to the Nearest Whole Number.
- A Man Invests Rs. 22,500 in Rs. 50 Shares Available at 10% Discount. If the Dividend Paid by the Company is 12%, Calculate: He Number of Shares Purchased and the Annual Dividend Received.
