Theory question 103
Business UnitsCommerce 2 (essay, answer five questions only)
Explain the following:
(a) Prospectus
(b) Share certificate;
(c) Underwriting of shares
(d) Ordinary shares;
(e) Dividend warrants
Show the model answer
(a) Prospectus – document issued by a public company inviting the public to buy its shares, giving details of the company and the offer.
(b) Share certificate – document issued under the company's seal to a shareholder as evidence of the number of shares he owns.
(c) Underwriting of shares – an issuing house or bank agrees, for a commission, to buy any shares the public does not take up.
(d) Ordinary shares – shares of the owners of the company, carrying votes and variable dividends paid after preference dividends; greatest risk.
(e) Dividend warrant – a cheque-like document sent by the company to a shareholder to pay his dividend.
One or two sentences per term.