Exercise 1.Complete the sentences using these words:
| arbitrageurs market-makers | bears shareholders | bulls stags | insiders stockbrockers |
1. People who buy stocks and shares are called … in Britain, and stockholders in the USA (although most of the shares of all leading companies are held by institutional investors such as pension funds and insurance companies).
2. People who buy securities expecting their price to rise so they can resell them before the next settlement day are known as … .
3. People who sell shares hoping to buy them back at a lower price before the next settlement day are called ... .
4. People who buy new shares issues hoping to resell them at a profit are known as ... .
5. Shareholders place their orders with, and sometimes seek advice from ..., who are members of the Stock Exchange, but who can work anywhere with a telephone and a computer screen connected to the Stock Exchange.
6. Brokers in turn buy shares from and sell them to ..., who are wholesalers in stocks and shares, and who guarantee to make a market at all times with brokers.
7. ... are people who occupy a position of trust within an organization and possess information not known to the public; buying or selling shares when in possession of such information that affects their price is illegal.
8. ... are people who buy stakes in companies involved (or expected to be involved) in takeover bids.
Exercise 2. A share (in British English) or a stock (in American English) is a security representing a portion of the nominal capital of a company. Complete the following using the words in the box:
| barometer stock blue chips defensive stock deferred stock equities growth stock mutual fund ordinary shares participation certificates preference shares or preferred stock |
1. Another name for stocks and shares is ..., because all the stocks and shares of a company – or all those of a particular cathegorie – have an equal nominal value.
2. ... (US common stock) are often the only kind of shares with voting rights.
3. Some companies issue ... , which, like shares, grant their holders part of the ownership of a company, but usually without voting rights.
4. ... or ..., as their name suggests, usually receive a fixed dividend is paid on other shares. But because interest payments are tax deductible, and dividends are not, many companies now issue bonds instead.
5. ... (or stock), again as the name suggests, do not receive a dividend if the company does well.
6. Securities in companies that are considered to be without risk are known as ....
7. Widely-held stocks that can be considered as indicators of present and future market performance, are known as ... (GB) or bellwether stock (US).
8. A ... or share is one that is expected to appreciate in capital value; it usually has a high purchasing price and a low current rate of return.
9. A ... or income stock or share is one that offers a good yield but only a limited chance of a rise or decline in price.
10. A way of streading risks is to invest in a unit trust (in Britain) or a ... (in the USA), organizations that invest small investors’ money is a wide portfolio of securities.
Exercise 3. Complete the texts with the words in the boxes.
Takeovers.
Sooner or later, all companies need to introduce new products and services. Large companies often have the choice of innovating – developing new products, services or markets themselves – or of buying another, smaller company with successful products. If the other company is too big to acquire, another possibility is to merge or amalgamate with it. Other reasons for taking over or combining with other companies include:
| diversifying optimizing rationalizing reducing reinforcing searching |
1. ... your company’s position;
2. ... competition;
3. ... production;
4. ... the use of a plant or invested capital;
5. ... products or markets;
6. ... for synergy (the belief that together the companies will produce more than the sum of the two separate parts).
| buy grow increase launch persuade sell |
A company that wants (7) ... or diversify can (8) ... a raid – in other words, simply (9) ... a large quantity of another company’s shares on the stock exchange. A “dawn raid” consists of buying shares through several brokers early in the morning, before the market has time to nitice the rising price, and before speculators join in. This will immediately (10) ... the share price, and may (11) ... a sufficient number of other shareholders to (12) ... for the raider to take control of the company.
| board friendly hostile poison pill white knight |
If a raid is not, or would not be, successful, a predator can make a takeover bid: a public offer to a company’s shareholders to buy their shares, at a particular price during a particular period. A (13) ... takeover has the consent of the directors of the company whose shares are being acquired; a (14) ... takeover bid is one undertaken against the wishes of the (15) ... of directors. Defences against a hostile takeover include the (16) ... a devensive action taken to repel a raider, such as changing the share voting structure or the board of directors, or spending all the conpany’s cash reserves. If measures such as these do not work, a company can at least attempt to find a (17) ... – another buyer whom they prefer.
Exercise 4. Fill in the missing words in the sentences below. Choose from the following:
| appropriation ordinary bonus issued preference uncalled | denomination preliminary interim redeemable nominal |
1. This company has issued shares in £5 …
2. At the end of the financial year, profits are first of all allocated to pay the fixed percentage dividends on … shares.
3. The … shareholders have voting rights but do not have a fixed percentage dividend.
4. The company have decided to issue … shares free of charge to their existing share holders.
5. The company is allowed to issue a total amount of shares known as the authorized share capital or … capital. However, the … capital may be less than that.
6. There were large … expenses in starting the company.
7. They have only asked for some of the amount payable on the shares, so there is still a lot of ... capital.
8. 2001/2009 written behind a debenture means that it is ... during that time.
9. The final accounts should include an ... account which shows how the company will use the profits.
10. After trading for six months, the company paid out an ... dividend.
Exercise 5. If you think the statements are true, tick the column headed true. If you thin k they are not true, tick the column headed false.
| 1. The Stock Exchange does not provide companies with funds; it is a market place for the purchase and sale of stocks and shares. 2. The purpose of a take-over bid may be to eliminate competition. 3. The directors may recommend that part of the profits are ploughed back into the business. 4. Non-voting shares will be of no interest to a take-over bidder. 5. Ordinary shares carry one vote each at the company’s general meetings. 6. If shares are quated on the Stock Exchange they will fetch a lower price. 7. When a company is taken over, the existing board of directors will be unaffected. 8. If you won 1,000 oedinary stock units of £1 each in ICI and dividend of 10p per unit is declared, you will receive £100, less tax. 9. If directors pay low dividends to the shareholders over a period of time, take-over bidders will be discouraged. 10. An inexpensive way for a company to raise funds is by a rights issue to its own shareholders. | True | False |
Exercise 6.Get ready for the discussion:
1. “A friendship founded on business is better than a business founded on friendship” (Rockefeller).
2. Money is like a sixth sense without which you cannot make a complete use of the other five. (S. Maugham)