Shares and Mutual Funds-2

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Authorized Capital: The amount of capital that a company can potentially issue, as per its memorandum, represents the authorized capital.

Issued Capital: The amount offered by the company to the investors.

Subscribed capital: The part of issued capital which has been subscribed to by the investors

Paid-up Capital: The actual amount paid up by the investors.

Typically the issued, subscribed, paid-up capitals are the same.

Par Value: The par value of an equity share is the value stated in the memorandum and written on the share scrip. The par value of equity share is generally Rs.10 or Rs.100.

                                   

Issued price:  It is the price at which the equity share is issued often, the issue price is higher than the Par Value

Book Value:   The book value of an equity share is

           

                                    = Paid – up equity Capital + Reserve and Surplus / No. Of outstanding shares equity

Market Value (M.V): The Market Value of an equity share is the price at which it is traded in the market.

Preference Capital: It represents a hybrid form of financing it par takes some characteristics of equity and some attributes of debentures. It resembles equity in the following ways

           

1.                    Preference dividend is payable only out of distributable profits.

2.                    Preference dividend is not an obligatory payment.

3.                    Preference dividend is not a tax –deductible payment.

Preference capital is similar to debentures in several ways.

1.                    The dividend rate of Preference Capital is fixed.

2.                    Preference Capital is redeemable in nature.

3.                    Preference Shareholders do not normally enjoy the right to vote.

Debenture:  For large publicly traded firms. These are viable alternative to term loans.  Skin to promissory note, debentures is instruments for raising long term debt. Debenture holders are creditors of company.

Stock Split: The dividing of a company’s existing stock into multiple stocks.  When the Par Value of share is reduced and the number of share is increased.

Calls-in-Arrears: It means that amount which is not yet been paid by share holders till the last day for the payment.

Calls-in-advance: When a shareholder pays with an instalment in respect of call yet to make the amount so received is known as calls-in-advance. Calls-in-advance can be accepted by a company when it is authorized by the articles.

Forfeiture of share: It means the cancellation or allotment of unpaid shareholders.

Forfeiture and reissue of shares allotted on pro – rata basis in case of over subscription.