Explain the following (a) Prospectus (b) Share certificate (c) Underwriting of shares (d) Ordinary shares (e)Dividend warrants.

Answer Details

Explanation of terms:

1. Prospectus: A formal document or invitation issued by a public company to the general public inviting them to subscribe for (buy) its shares or debentures. It contains details of the company's activities, prospects and terms of the offer.
2. Share certificate: A document issued by a company under its seal as evidence that the named person is the registered owner of the stated number of shares. It shows ownership and the amount paid on the shares.
3. Underwriting of shares: An arrangement whereby an underwriter (usually a bank or issuing house), for a commission, agrees to buy up any shares of a new issue that are not taken up by the public, thereby guaranteeing the company that its shares will be fully subscribed.
4. Ordinary shares: These are the equity shares of a company whose holders are the real owners and risk-bearers. They receive dividends only after preference shareholders have been paid, the rate varying with profit, and they carry voting rights.
5. Dividend warrants: A document, similar to a cheque, sent by a company to a shareholder authorising the shareholder to receive the dividend due on the shares from the company's bank.