Myiris.com - Personal finance India for shares, stocks, equity, mutual funds, loans, credit cards, insurance, tax, mutual fund NAVs, BSE, BSE India, NSE, NSE India, share, mutual fund, loan, company results, credit card, and more...
28 March, 2024 19:21 IST
Financial Planning
   
Three corporate actions to be known for investing...
Source: IRIS (22-DEC-14)

  Understanding and tracking corporate actions form the base of investing in equities. Investing is one way in which one can grow his or her money. (Which everyone young or old is keen on now a days)  Investing in equities is an art and requires fundamental knowledge. It is not a night's job to master equities. One needs to track daily corporate actions and gather other news before taking informed decisions on the equities more often known as stocks.

I will not go by the normal theoretical way of explaining the corporate actions but will take an hypothetical example of a company. Along with the case, you will also come across various terms which will be explained side-by-side

Let's take the example of Mr Raghav who is interested in buying 5 shares of company ABC which is running on the face value (the nominal value stated by the issuer) of Rs 10. The Current Market Price (Price on the Sensex - Price at which it is bought) is Rs 50. The Company has 100 shares outstanding (No of shares which investors can buy)

Suppose the company ABC which Raghav is tracking declares a bonus (which is also referred to as stock split and is given in ratios form) in the ratio of 2:1. The number of shares available in the market will double to 200 and the face value of the share will become 5.  This will not change the current market price, but will nonetheless is a corporate action to be tracked as it increases the liquidity in the market and can attract new buyers.

ABC, after a short period declares dividend of 10%. This means, that Raghav will earn extra shares of 10% * 5 (New Face Value) worth 2.5 for the total 5 shares earned. This will also increase the outstanding number of shares by 10% making the new value to 220 outstanding shares. This action will dilute the earnings per share and will also decrease the price of the share.

If ABC declares rights issues, it simply means that Raghav has an added advantage over other buyers to buy the shares. This will generally be issued along with splits and bonus issues.

If tracked properly, these corporate actions though not holistic in nature can help investors like Raghav, take additional benefit from the stock and earn more income from the earnings.

(Contributed by Leena Chandan, independent writer, whose articles can be read on http://financialgyanmantra.blogspot.in/)




More Articles
How can companies can save themselves from getting bankrupt in Covid-19 - 14-May-21
How Tax Planning can help you Create Wealth - 27-Feb-19
Financial Planning for Couples - 20-Feb-19
The Flip Side of Early Retirement - 29-Jan-19
What is HappyRich? - 15-Jan-19
>>more 
Financial Calculator
Calculate your total net worth
Magic of compounding
Meet your dreamz calculator
Retirement planning
Am i saving enough for retirement?
>>more 
Home  |   Shares  |   F&O  |   Mutual Funds  |   Loans  |   Insurance  |   News Centre
Wealth Tracker  |   Newsletters  |   Tax Corner  |   NRI Centre  |  
© All rights reserved. IRIS Business Services Limited
A Disclaimer