Share Market Terms

Share Market, Shares, Investment, Broker, Options, Entrepreneur

Key Terms

Share - Shares are traded on the Stock Exchange, a market place where public companies are listed and their shares open for trade. When you buy a share, you purchase an ownership stake in a public company. You receive part of the company' profits through payments known as dividends. If the share price rises, you may also see a capital gain.

Dividend - A company may pay all or part of its profits to its shareholders. This payment is a dividend. Before investing, check the company's dividend record. Dividend income may be attractive, especially if you're a retiree relying on investment income.

Dividend Yield - Dividend Yield is the dividend as a percentage of the share price. This ratio helps measure the dividend return being received on the shares.

Brokerage - Shares must be traded through a licensed broker, who is paid brokerage fees to buy and sell shares for us. Generally, fees range from 1% to 3% depending on the amount of shares traded and the trading relationship with your broker. There are also flat-fee discount brokers in operation these days. Before commencing your trading relationship with your broker, always check the fees applicable to your situation.

Bonus Shares - Bonus shares are free, new shares issued to shareholders in proportion to their current holding - e.g. a one for five issue.

Options - Options give the right to buy shares on particular terms within a specified time. Options are traded like shares.

Rights Issue - A rights issue is an invitation by the company to existing shareholders to buy new shares at a discount to the market price.

Ex Dividend - Purchasing shares ex dividend means the holder does not receive the current year's dividend.

Cum Dividend - Purchasing shares cum dividend means the holder buys in time to receive the current years's dividend.

Earnings Per Share (EPS) - This ratio helps measure company profitability. It shows how much net profit is earned for each share.

Price Earnings Ratio (PE) - This helpful statistic measures how accurately the share price reflects the value of the company. It's the ratio of share price to EPS. PE ratios should generally be between 8 and 15 time the EPS. A low ratio means a company' shares may be bargain priced.

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