Shares, Share Prices and Market Capitalisation

The ownership of an incorporated business is determined by who owns the shares - otherwise known as the "shareholders"!

WHAT IS A SHARE?

A share is an individual part of the total issued share capital of a company.

Most shares that are issued by a company are “ordinary shares”. This means:

• Equal voting rights based on number of shares held (shareholding)
• The shareholding % = the number of shares held compared with the total number of shares issues
• Shares qualify for a dividend –but, only if one is paid

HOW do SHARES AND SHARE PRICES DETERMINE THE VALUE OF A COMPANY?

The value of a company is ultimately determined by the price at which shares are bought and sold. A common term for the total value of a quoted company (i.e. whose shares are traded on a stock market) is market capitalisation.

Market capitalisation represents the total market value of the issued share capital of the company. It is calculated using this formula: