What are the ordinary shares?

Ordinary shares are the normal shares issued by a company. The ordinary shareholders can vote at company meetings and receive dividends from profit. Ordinary shares are often referred to as equity shares. The ordinary shareholders are the real owners of the business.

The advantages of ordinary shares are that ordinary shareholders may receive dividends from their company out of its profit. These dividends are often paid twice each year, an interim dividend during an accounting year and a final dividend after the balance sheet date when the company’s profit for thee year is known. Dividends will vary according to the company’s level of profits and its dividend policy. Ordinary dividends are often expressed in terms of cents per share.

No dividend may be paid on the ordinary shares until the dividend on the preference shares has been paid in full. Dividends are not expenses of the company to be deducted in computing profit, but a share of the final profit paid to the owners of the company.

The disadvantages of ordinary shares are that ordinary shareholders will bear the operational risks.

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1. The difference between ordinary and preference shares
2. Preference shareholders
3. Disclosures relating to share capital
4. How to do when the company appears to be a cash shortfall?
5. Return on capital employed(ROCE)