Understanding Shares

Course : Managerial Finance Lecture : Marc Credit Hours : 3 Credits Semester Sessions : 3 Semester, 2021/2022 Session Prepared By : Kenzo LECTURE NOTES UNDERSTANDING SHARES Shares are securities which are a sign of ownership a person or entity towards a company. This definition of shares means are securities issued by a company in the form of a Limited Liability Company (PT) or what is usually called an issuer. Share states that the owner of the shares is also a partial owner of that company. Thus, if an investor buys shares, then he becomes the owner or shareholder of the company. The form of shares is a piece of paper that explains that The owner of the paper is the owner of the company that issued the letter that valuable. The ownership portion is determined by how big it is investment invested in the company. Shares are also interpreted as a sign of participation or ownership of a person or entity in something company or a security that shows ownership a person or legal entity against a share issuing company (Darmadji and Fakhruddin, 2001:5). Shares are one of the most common capital market instruments.investors are interested in it because it provides an attractive level of profit. Shares can be defined as a sign of someone's capital participation or unilaterally (business entity) in a company or limited liability company. By including capital, the party has a claim on it company income, claims on company assets, and the right to attend meetings general shareholders. TYPES OF SHARES Based on ownership rights, shares can be divided into 2 types (Fakhruddin and Hadianto, 2001:12), namely: 1. Common shares (common stocks) These are shares that have the most junior owners in them regarding the distribution of dividends and rights to company assets if the company was liquidated. These ordinary shares are shares that most widely known and traded on the market. As owner Shareholder companies usually have the following rights: a. Control Rights Common shareholders have the right to elect the board directors. This means t shareholders have rights to control who will lead the company. Shareholders can exercise their control rights in the form of veto the election of directors at the annual meeting of shareholders or actions that require the holder's consent share. b. The right to receive Profit Sharing As owners of the company, ordinary shareholders have rights get a share of the company's profits. Not all profits distributed, but some of the profits will be plowed back into company. This retained earnings (retained earnings) is internal sources of funds for the company while profits are not retained given to share owners in the form of dividends. c. Preemptive Rights Preemptive rights are the right to obtain the same ownership percentage if the company issues additional shares. If the company issues additional there will be more shares in circulation and as a result the percentage of old share ownership will decrease. Preemptive rights give priority to existing shareholders to buy additional new shares, so the ownership percentage is not changed. This right has two purposes. First goal is to protect the control rights of old shareholders, the second purpose of these rights is to protect shareholders long period of declining value. 2. Preferred shares (preferred stocks) These shares have the characteristics of a combination of bonds and shares normal because it can generate a steady income, but it can also bring the results that investors want. There are two things The reason why preferred shares are similar to ordinary shares is that they represent equity ownership and is issued without a maturity date written on the share sheet and pay dividends. The difference between preferred shares and bonds lies in three things, namely claims on profits and assets, fixed dividends during the validity period of the shares, represents the right of redemption and can be exchanged for ordinary shares. Some The characteristics of preferred shares are as follows: a) Preference for dividends, Preferred share holders have rights to receive dividends before shareholders normal. Preferred shares generally provide cumulative dividend rights, namely giving the holder the right to receive dividends previous years that have not been paid, and paid before ordinary shareholders receive their dividends. b) Preference on liquidation time. Preferred shares have preferential rights first on the company's assets compared to the rights owned by ordinary shares upon liquidation. The amount of rights to assets is the nominal value of the preferred shares including all dividends unpaid if it is cumulative.