Basics of Stocks
SECURITIES
Investment that represents evidence of debt or owenership or legal rights to acquire or sell an ownership interest are called securities.
Par Value: The term par value refers to the stated, or face, value of a stock. All stocks are issued with a par value, no-par value or some nominal value.
market price:The price at which the stocks trade in the market is called market price.
Book Value:
Book value represents the amount of stock holder's equity in the firm. It indicates the amount of stockholder's funds used to finance the firm. Let's assume that a corporate has 10 million in asset, owes $5 million in various forms of short and long-term debt and has $1 million worth of preffered stock outstanding. The book value of the firm would be $10-($5+$1)= $4 million. This amount could be convered into book value per share by dividing it by number of outstanding shares. If this firm has 100,000 shares of common stock outstanding, then its book value per share is $40.
There are two different kinds of stocks, which are
Preferred Stock: Preferred stocks generally have a fixed cash dividend, such as $5 per share, which must be paid before common stockholders receive any cash dividends. An order executed on the exchange must be settled within five working days. Settlement is simplified further by the existence of clearing house.
Dividends: stock holders receive the cash dividends that many, but not all, companies pay. There are three basic forms
Timing of Dividends Payment: Investors should know four dates in the process of dividend payment.
Date declared: The date declared is the date on which the board of Directors of the company declares that it is going to pay a dividend in the future. At the same time they announce the Date of record. Only those stockholders who are recorded on the transfer books on the date of record are entitled to receive the dividend. It takes four business days from the time a person buys stock until it is properly recorded on the company’s books.
Date payable: The date payable is the date when the dividend will be paid.
Ex-dividend date: This is the date on which the seller, and not the buyer, of a stock will be entitled to a recently announced dividend. The ex-date is usually two business days before the record date. It is indicated in newspaper listings with an x.
Stock Dividend: The Stock Dividend is usually expressed as a percentage as 2% or 5%. A stock holder who owns 100 shares when a 5% stock dividend is declared will receive an additional 5 shares.
Stock splits are usually expressed as 2 for 1 or 3 for 1. A 2 for 1 stock split means the stock holder will have two shares for every one share currently held.
From an investors point of view both Stock Dividend and Stock Splits are the same.
Registration of Stock Certificates
Two ways to register a stock are as follows