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ACC 333 (82)
Jian Guan (35)


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ACC 333
Jian Guan

What is equity? Equity is the term commonly used to describe the ordinary share capital of a business. Ordinary shares in the equity capital of a business entitle the holders to all distributed profits after the holders of debentures and preference shares have been paid. Ordinary ( equity) shares Ordinary shares are issued to the owners of a company. The ordinary shares of UK companies typically have a nominal or 'face' value (usually something like £1 or 5Op, but shares with a nominal value of 1p, 2p or 2Sp are not uncommon). However, it is important to understand that the market value of a company's shares has little (if any) relationship to their nominal or face value. The market value of a company's shares is determined by the price another investor is prepared to pay for them. In the case of publicly- quoted companies, this is reflected in the market value of the ordinary shares traded on the stock exchange (the "share price"). In the case of privately-owned companies, where there is unlikely to be much trading in shares, market value is often determined when the business is sold or when a minority shareholding is valued for taxation purposes. In your studies, you may also come across "Deferred ordinary shares". These are a form of ordinary shares, which are entitled to a dividend only after a certain date or only if profits rise above a certain amount. Voting rights might also differ from those attached to other ordinary shares. Why might a company issue ordinary shares? A new issue of shares might be made for several reasons: (1) The company might want to raise more cash For example
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