TITLE PAGE

SHARES AS A FORM OF FINANCING COMPANY BUSINESS

A TERM PAPER

ON

COMPANY LAW (ACCT 718)
AHMED II ABDULWAHAB HASSAN
PGDAF/ADM/2011/2012/693

POST GRADUATE DIPLOMA IN ACOUNTING AND FINANCE
DEPARTMENT OF ACCOUNTING AND FINANCE
AHMADU BELLO UNIVERSITY, ZARIA

AUGUST, 2012

INTRODUCTION

A unit of ownership interest in a corporation or financial asset. While owning shares in a business does not mean that the shareholder has direct control over the business’s day-to-day operations, being a shareholder does entitle the possessor to an equal distribution in any profits, if any are declared in the form of dividends.

Shares in a company represent ownership. This means when an individual buys shares in a company, they become one of the owners of the business. This entitles them to a share of the distributable profits of the company - the dividends.

DEFINITION OF SHARE

A share is a single unit of ownership in a corporation, mutual fund, or any other organization. A joint stock company divides its capital into shares, which are offered for sale to raise capital, termed as issuing shares. Thus, a share is an indivisible unit of capital, expressing the proprietary relationship between the company and the shareholder. The denominated value of a share is its face value: the total capital of a company is divided into number of shares.

Types of Shares

There are four main types of shares

1. Equity Shares

These shares are also known as ordinary shares. They are the shares which do not enjoy any preference regarding payment of dividend and repayment of capital. They are given dividend at a fluctuating rate. The dividend on equity shares depends on the profits made by a company. Higher the profits, higher will be the dividend, where as lower the profits, lower will be the dividend. These are standard