CLASS-10SOME IMPORTANT CONCEPTS ABOUT SHARES & DIVIDEND

Some Important Concepts About Shares & Dividend

(i) The face value of a share always remains the same.

(ii) The market value of a share changes from time to time.

(iii) Dividend is always paid on the face value of a share.

(iv) Number of shares held by a person.

Total Investment             Total Income           Total Face Value

= ------------------- = ----------------- = -------------------

Investment in 1 share     Income from 1 share    Face value of 1 share

Some Important Formulae

(i) Dividend/Income of a share holder

Rate of Dividend

= Face Value X No. of share X ------------------

100

(ii) Investment/ Sale proceeds = Number of Shares X Maturity Value (M.V)

(iii) Yield Rate/Rate of return on Investment/ Money’s worth

Dividend

= -------------- X 100

Investment

Note Yield rate is useful in comparing shares of one company with that of the other. Shares having a higher yield rate is a better investment than the shares having a lower yield rate.

There are some statement given below for better understanding –

10% \$100 shares at \$120 means –

(i) Face value or Nominal Value (N.V) of 1 share = \$100

(ii) Market Value (M.V) of 1 share = \$120

(iii) Annual dividend on 1 share = 10% of its face value = 10% of \$100 = \$10

(iv) An investment of \$120 gives an annual income of \$10

(v) Rate of return per annum = Annual income from an investment of \$100

10

= (100 X ------- ) %

120

25                 1

= ------- %  = 8 ------%

3                 3