1. Explain what shares are. A share is a small part of an organization. When you buy shares in a publicly listed company, you get part ownership in that organization and you can share in its growth and success. 2. Explain what the term dividend means.
A dividend is when a company you have shares in makes profits and you, as a shareholder you are entitled to part of these profits so you get given a dividend. 3. Describe the rights you have as a share owner. As a shareholder you have the right to vote on important matters at shareholders meetings and you also have the right to re-sell your shares to other buyers in the market. 4. The share market is divided into two distinct markets: a) Primary market b) Secondary market Explain what is meant by both of these terms.
The primary market deals with companies that wish to increase capital (funds / money ) by selling shares to the general public for the first time. The secondary market deals with the trading of shares (buying and selling). Once shares are traded on the secondary market, forces of supply and demand will determine the prices of shares. 5. Outline various factors that can influence the value of shares. Factors that influence the value of shares are demand for them and force of supply.
If there are more buyers than sellers the share price will rise and, naturally, if there are more sellers than buyers the share price will drop. Other factors such as scarcity of resources, market competitors, success of marketing campaigns and so forth. 6. Outline two pieces of information about what the ASX does. The ASX is a non-profit organization that provides the facilities to enable shares to be bought and sold. The ASX also sets the business rules, which governs its internal structure, particularly in relation to the admission and discipline of members.
Another thing the ASX does is makes sure companies comply with its ASX listing rules so the companies can initially be listed and stay listed. 7. What is the responsibility of Australian Securities Commission? The Australian Securities Commission has the responsibility of overseeing the proper workings of the Stock Exchange. It is a federal government body. 8. What is a brokerage fee? When a person wants to buy shares, they require the services of a stockbroker who is a member of the ASX.
A stockbroker charges a fee for the performance of this agency service and this charge is called a brokerage fee. 9. How often are dividends usually announced by a company? A company usually announces dividends twice a year and they are expressed as cents per share. 10. Explain what is meant by the term capital gain.
When you first buy a share it has a price. If the price of the share has increased in value by the time you sell it, you have gained value. The difference between the original price and the selling price is called capital gain. If the difference is negative you have capital loss. 11. What is the All Ordinaries Index? The All Ordinaries Index tells acts as a measure of whether general share prices are going up or down in the Australian Share market.
12. What is used to calculate the All Ordinaries Index? The All Ordinaries Index is calculated by using the share prices of 300 of the companies listed on the ASX. These 300 companies chosen are the largest companies listed on the ASX because these companies have the most frequently traded shares. 13.
Explain what is meant by a 'bull' market and a 'bear' market. A 'bull' market is when the market is rising as a 'bull' throws the market prices up. A 'bear' market is when the market is falling as a 'bear' claws market prices down. 14.
Explain the meaning of the following terms as seen on a share listing in the newspapers. a) Close b) Move c) Turnover d) P/E ratio a) Close is the price the share was sold for in the last sale for the day. The market officially closes at 4: 15 pm each day. b) Move is the amount by which the last sale price is up or down on the previous day's close. c) Turnover or volume refers to the number of shares that were traded that day. d) P/E ratio is an indication of how well a company is performing.
The lower the P/E ratio, the better the company is performing. It is figured out by price divided by earnings.