...QUIZ QUESTIONS SHARE CAPITAL 1. What impact does the bonus issue of shares have on the equity of a company? Why? (1 Mark) 2. Define a share option? (1 Mark) 3. Provide one reason why a company would wish to buy back its own shares? (1 Mark) 4. Distinguish between a renounceable and non-renounceable rights issue? (1 Mark) 5. What is a private placement of shares? (1 mark) 6. Name two reasons why a company could make an appropriation of its retained earnings? (1 Mark) 7. Prepare journal entries to record the following unrelated transactions of a public company: (3 Marks) a) payment of interim dividend of $50,000 b) transfer of $50,000 from the general reserve to retained earnings c) payment of 100,000 bonus shares fully paid at $2 per share from retained earnings. 8. The equity of Master Shipping Ltd on 30 June 2009 consisted of: 280,000 ordinary shares, issued at $2.40 each, called to $2.40 $672,000 Calls in arrears (24,000 shares x 80c) ($19,200) The directors forfeited the shares on which the call was outstanding. The company’s constitution provides that forfeited shares cannot be reissued and that the balance of any forfeited amounts, net of reissue costs, must be refunded to the former shareholders. Refund cheques were sent to shareholders. Prepare journal entries to record a) forfeiture of shares b) refund of forfeited amounts to shareholders...
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...Companies are not required to take any specific approval from SEBI. Things to remember before considering Bonus Issue Bonus shares cannot be issued if the company has come out with any public / rights issue in the past 12 months. Bonus shares cannot be issued in lieu of Dividend. Bonus shares can be issued only out of free reserves (i.e. reserves not set apart for any specific purpose) built out of the genuine profits or share premium collected in cash only. Bonus shares cannot be issued out of the reserves created by revaluation of fixed assets. If the existing shares are partly paid up, the company cannot issue Bonus Shares. It will be appropriate to first make the shares fully paid up before issuing Bonus Shares. It should be ensured that the company has not defaulted in payment of interest or principal in respect of fixed deposits and interest on existing debentures or principal on redemption thereof and It should be ensured that the company has sufficient reason to believe that it has not defaulted in respect of the payment of statutory dues of the employees such as contribution to provident fund, gratuity, bonus etc. If the company has already issued either fully convertible debentures or partly convertible debentures than in that case the company is required to extend similar benefits to such holders of securities through reservation of shares in proportion to...
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...Share Repurchase: Is it good or bad? Financial Strategy (BMBA715.2) Date: 27th March 2013 Tutor: Mark Pilkington Author: Nandkumar Mahajan (136866461) Word Count: 3069 Table of Contents Executive Summary ............................................................................................................................. 3 Company capital structure & Shareholder value ...................................................................... 4 Why companies really repurchase shares? ................................................................................ 6 Is there any real value in share repurchase? ............................................................................. 7 Hewlett-‐Packard (HPQ) ................................................................................................................................ 7 Next Plc. (NXT) ........................................................................................................................................... 10 Conclusion ..................................................................................................................
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...Competitor-oriented Objectives: The Myth of Market Share J. Scott Armstrong, The Wharton School, University of Pennsylvania, Philadelphia, PA 19104 E-mail: armstrong@wharton.upenn.edu Phone 610-622-6480; Fax 215-898-2534 Kesten C. Green, Department of Econometrics and Business Statistics Monash University, VIC 3800, Australia E-mail: kesten@kestencgreen.com Phone +64 4 976 3243; Fax +64 4 473 0643 February 21, 2006 IJB05CmObj27.doc International Journal of Business (forthcoming) Abstract Competitor-oriented objectives, such as market-share targets, are promoted by academics and are commonly used by firms. A 1996 review of the evidence, summarized in this paper, indicated that competitor-oriented objectives reduce profitability. However, we found that this evidence has been ignored by managers. We then describe evidence from 12 new studies, one of which is introduced in this paper. This evidence supports the conclusion that competitor-oriented objectives are harmful, especially when managers receive information about market shares of competitors. Unfortunately, we expect that many firms will continue to use competitor-oriented objectives to the detriment of their profitability. Key words: competition, market share, objectives, profitability. JEL CLASSIFICATION: L21, M21, M31. 2 Many managers have a natural inclination to want to beat their competitors. Our concern in this paper is the relationship between competitor orientation and performance. We show that competitor-oriented...
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...receive cash without being paid dividends. A firm can buy back some of its shares with the advantage being that most investors are not taxed as heavily on shares sold as they are on dividends received.(The Dividend Puzzle) Any increase in the dividend that is not financed by external financing will hurt creditors. Any money that is payed out in dividends is lost to the creditors if trouble develops. Repurchases are an efficient way to reduce agency costs of free cash flow, like dividends, but repurchases increase the debt-equity ratio with possible debt overhang costs. Shareholders would benefit from share repurchases as they would pay lower tax on the capital gain then they would on a dividend income payment. They could potentially find themselves to be better off with a repurchase. Shareholders would view a repurchase as positive as if the market reacts positively to announcements of dividend increases then it should also do for repurchases. Share prices traditionally rise by 3 % when firms announce open-market share repurchases. Buybacks can also signal to shareholders that the firm is underpriced; however Gainesboro could also be buying back shares from particular shareholders in order to distribute cash to insiders before revealing bad news to the market. So Gainesboro must be careful in the way it undertakes the buyback if it wants to portray positive news to shareholders. Share repurchase may also have an effect on ownership structure of the firm; this...
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...Information Asymmetry, Signaling, and Share Repurchase Jin Wang Lewis D. Johnson School of Business Queen‟s University Kingston, ON K7L 3N6 Canada Email: jwang@business.queensu.ca ljohnson@business.queensu.ca February 2008 We acknowledge helpful comments from participants at the presentation of an earlier version of this paper at the 2006 European FMA Conference in Stockholm, Sweden. 1 We examine whether share repurchase announcements or actual share repurchases provide reliable signals to convey information to investors. We find that increases in operating performance and decreases in systematic risk are correlated with actual repurchase amounts but are not correlated with repurchase announcements. Further, we find that long-run abnormal stock returns are correlated with actual repurchase amounts but not with repurchase announcements. The paper has important implications for research on stock repurchases, since most literature to date has focused on the announced repurchase magnitude, which may lead to misleading results. Keywords: Share repurchase, operating performance, signaling JEL Classification: G35 2 Information Asymmetry, Signaling, and Share Repurchase Repurchasing of shares has represented a growing proportion of total U.S. corporate payouts in recent years. The ratio of expenditure on the purchase of common and preferred stocks to market value has risen from 0.19% in 1972 to 1.36% in 2000, whereas the ratio of total dividends declared on...
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...To Share or not to Share Peter Todd Shawshank University To Share or not to Share Have you ever taped music off your favorite radio station? That's the old way you would do it if you can't afford the albums. Today people are not only downloading music off the internet but also pictures, movies, games, software and any other kind of computer files that could be beneficial. Each week there are more than one billion downloads of music files alone. Participation in file sharing has also grown. Over 60 million Americans above the age of twelve have downloaded music (Ipsos-Reid, 2002b). File sharing is heavily linked to youth. While a majority of Americans under 18 years old have downloaded and half of those are heavy users, only a fifth of those aged 35-44 have downloaded files (Edison Media Research, 2003). Among U.S. adults at least 18 years old, the number of downloaders has about doubled since 2000 (Pew Internet Project, 2000 and 2003). Because physical distance is largely irrelevant in file sharing, individuals from virtually every country in the world participate. When peers download, they don't all download from one place. Millions of peers around the world are connected and they download files off of each other's computer. Popular networks are Kazaa, WinMX, Limewire, Morpheus, Frostwire and many more. Downloading files is free, but many people are confused that it would be stealing. The RIAA (Record Industry Association of America) had announced that it is stealing...
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...* HOW DO CULTURE AND OTHER FACTORS AFFECT THE SOCIAL ORGANIZATION OF A COMMUNITY? * HOW DO CULTURE AND OTHER FACTORS AFFECT THE LEADERSHIP OF A COMMUNITY? * WHAT ARE EXAMPLES OF SOCIAL NETWORKS AND ETHNIC ORGANIZATIONS THAT A COMMUNITY BUILDER CAN USE TO LEARN ABOUT THE SOCIAL ORGANIZATION OF A GROUP AND TO IDENTIFY AND ENGAGE ITS LEADERS? * WHAT ARE SOME OF THE COMMON CHALLENGES THAT A COMMUNITY BUILDER MIGHT FACE WHEN WORKING IN A DIVERSE COMMUNITY? In order to work effectively in a culturally and ethnically diverse community, a community builder needs to first understand how each racial and ethnic group in that community is organized in order to support its members. It is not uncommon to hear a community leader, a funder, a political representative, or a service provider say, "We were not able to engage that group over there because they are not organized. They have no leaders. We need to organize them first." This statement is not always accurate; most groups have their own network of relationships and hierarchy of leaders that they tap into for mutual support. These networks or leaders may not be housed in a physical location or building that is obvious to people outside of the group. They may not even have a label or a title. There is an unspoken understanding in some groups about when and whom they should turn to among their members for advice, guidance, and blessing. Once a community builder understands the social organization of the group, it will become easier...
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...Value of Equity and Per Share Value when there are options and warrants outstanding Aswath Damodaran 1 Equity Value and Per Share Value: A Test l Assume that you have done an equity valuation of Microsoft. The total value for equity is estimated to be $ 170 billion and there are 1204 million shares outstanding. What is the value per share? 2 An added fact l On September 30, 1997, Microsoft had 258 million options outstanding, granted to employees over time. These options had an average exercise price of $ 42 (the current stock price i $ 140). Estimate the value per share. 3 Equity Value and Per Share Value l l The conventional way of getting from equity value to per share value is to divide the equity value by the number of shares outstanding. This approach assumes, however, that common stock is the only equity claim on the firm. In many firms, there are other equity claims as well including: – warrants, that are publicly traded – management and employee options, that have been granted, but do not trade – conversion options in convertible bonds – contingent value rights, that are also publicly traded. l The value of these non-stock equity claims has to be subtracted from the value of equity before dividing by the number of shares outstanding. 4 Warrants l l l A warrant is a security issued by a company that provides the holder with the right to buy a share of stock in the company at a fixed price during the life of the...
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...The first characteristic of common shares is ownership in the company. Investing in common shares means owning a (very small) piece of a company. Ownership is important as it allows the investor to benefit from growth in the company. Besides, another characteristic is it can participate in Corporate Success. As a common shareholder of a public company, you may directly and indirectly share in the profits of the company. Moreover, dividends and capital gain are also the characteristic of common shares. Dividends that the company declares and pays come from the earnings of the company. If the company does well, you can directly benefit by receiving dividends. Normally, there is no right to a dividend for common shareholders (unlike preferred shareholders). But if the company deems it prudent, excess earnings are often paid out to common shareholders. We will look at dividends a little more later, as they are integral to some investors’ strategies. For capital gains, you may indirectly share in the company’s success by the value of your stock increasing. A change in the share value has many causes. Earnings – current, but more importantly the expected future earnings – is a major determinant of share price. If the earnings outlook appears rosy relative to competitors, other companies, other asset classes, etc., the share price should increase. We will review the factors that impact share valuations later. Besides that, common shares have limited liability. A corporation is an...
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...Life Insurance and Superannuation Models Week 1: Life Insurances (Single Life) 1 / 27 Week 1: Life Insurances (Single Life) Summary Life insurance. Benefits payable contingent upon death; payment made to a designated beneficiary. Actuarial present values (APV ) Actuarial symbols and notation Insurance payable at the moment of death Continuous Level benefits, varying benefits (e.g. increasing, decreasing) Insurances payable at the end of year of death Discrete Level benefits, varying benefits (e.g. increasing, decreasing) References Chapter 4 (Bowers, et al.) or Chapter 3 (Gerber) ACTL3002: Week 1 2 Life Insurance Contracts Made between a life insurance company and one or more persons called the policyholders Policyholders agree to pay an amount or series of amounts to the life insurance company called premiums. In return the life insurance company agrees to pay an amount or amounts called benefit(s), to the policyholder on the occurrence of a specific event. Benefits payable under two main types: On or following the death of the policyholder, Payable provided the life survives for a given term e.g. annuity. ACTL3002: Week 1 3 Types of Life Insurance Contracts Whole life insurance contract Benefits are paid on the policyholder’s death Term assurance contract A contract to pay a sum assured on or after death provided death occurs during a specified period, called the term of the contract. Pure endowment contract Provides...
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...Facebook Prospectus Project Review the Facebook Prospectus and answer the following questions. 1. How many total shares of stock are being offered by Facebook? -180,000,00 2. How many shares are new shares, and how many are existing shares being sold by current shareholders? -421,233,615 3. Describe the classes of shares, and the voting rights the shares will have. * Shares of Class A common stock are entitled to one vote per share. * Shares of Class B common stock are entitled to ten votes per share 4. Which class of stockholders will hold control of the company? -Class B 5. Does any one shareholder have control of the company? If so…who? -A dual class common stock holder 6. On which exchange will Facebook be traded? NYSE 7. At what price is the stock offered to the public? - $38.00 per share 8. What is the Underwriters Commission? * Underwriting commission is the compensation that an underwriter receives for placing a new issue with investors. It is the fee which an investment banker charges for underwriting a security issue 9. What are the net proceeds expected by Facebook. - $998 million 10. What investment banks make up the Underwriting Syndicate? * ALLEN & COMPANY LLC CITIGROUP CREDIT SUISSE * DEUTSCHE BANK SECURITIES RBC CAPITAL MARKETS * WELLS FARGOSECURITIE 11. Review the risk factors. Which 3 or 4 cause you the greatest concern? If we fail to retain existing users...
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...for jobs. • set a good example at the top. • keep tighter control of information. • reward people for snitching on office politicians. Question 2 As the leader shares power with others, the leader’s power • remains approximately the same. • increases. • multiplies in direct proportion to the number of people receiving a power share. • decreases. More questions are hide….. STR MGT 550 Final Exam A recommended strategy for minimizing office politics is to • increase the competition for jobs. • set a good example at the top. • keep tighter control of information. • reward people for snitching on office politicians. Question 2 As the leader shares power with others, the leader’s power • remains approximately the same. • increases. • multiplies in direct proportion to the number of people receiving a power share. • decreases. More questions are hide….. STR MGT 550 Final Exam A recommended strategy for minimizing office politics is to • increase the competition for jobs. • set a good example at the top. • keep tighter control of information. • reward people for snitching on office politicians. Question 2 As the leader shares power with others, the leader’s power • remains approximately the same. • increases. • multiplies in direct proportion to the number of people receiving a power share. • decreases. More questions are hide….. STR MGT 550 Final Exam A recommended strategy for minimizing office politics is to • increase the competition for jobs...
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...Balance sheet: stockholder's section ACC/545 March 09, 2015 Brooke Call Balance Sheet: stockholder's section Treasury stock Treasury stock is the portion of the shares that a company keeps in their own treasury. Companies acquire treasury stock for the following reasons (1) to offset the dilution from the issuance of stock, (2) to provide shares to meet stock- based compensation, (3) to combat a hostile takeover, (4) to increase earnings per share and to reduce future cash dividends. There are two methods to account for treasury stock, (1) the cost method, which records the treasury stock account at cost of shares reacquired and (2) Par value method which records the treasury stock account at the par value of shares reacquired. Treasury stock is location on the balance sheet. Example of cost method journal entry Purchases 200 shares of treasury stock for 25 a share Treasury stock (cost) 200x $25 5,000 Cash 5,000 Retained earnings The capital that is generated as profit by an organizations business transactions has to be accounted for, management has one of two choices: either pay a cash dividend to their shareholders or retain the earnings to reinvest in the business. Once management makes the decision to retain earnings the earnings have to be accounted for on the balance sheet under shareholder equity. This entry into shareholder equity allows the shareholder to see the historical record of...
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...For around 25 shares of Re 1 of CBoP, an investor will get one share of Rs 10 of HDFC Bank. In last two days, share price of CBoP moved from Rs 49.85 on Wednesday to Rs 56.40 on Friday. However, it seems, investors of HDFC Bank did not like the development. The share price of HDFC Bank on Thursday moved up from Rs 1,534.50 to Rs 1,543. But on Friday, it fell sharply to Rs 1,475. Prior to this, in August 2007, CBoP was merged with Lord Krishna Bank. * 2008 HDFC Bank acquired Centurion Bank of Punjab. The swap ratio is expected to be around 1:25-30,” said a banking source. The merger will make HDFC Bank the country’s seventh largest bank after Bank of India (BoI) and ahead of IDBI Bank, from the current 10th position. The merger talks between the two banks began in January 2008 after the principal shareholders of CBoP – Bank Muscat with 14.02 per cent stake, Sabre Capital with 3.48 per cent stake and Kephinance Investment (Mauritius) with 6.13 per cent — decided to exit. 1) HDFC Bank Board on 25th February 2008 approved the acquisition of Centurion Bank of Punjab (CBoP) for Rs 9,510 crore. BENEFITS FROM THIS DEAL * The HDFC Bank, which currently spans India with its chain of 746 branches, will add to itself 394 branches of the CBoP to itself, to make its network bigger and stronger. The merger talks between the two banks began in January 2008, after the principal shareholders of CBoP – Bank Muscat with 14.02 per cent stake, Sabre Capital with 3.48 per cent...
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