Unit study guide · NISM Series II-A
Characteristics of Equity Shares
10 questions in this unit
What this unit covers
- Which term describes the nominal amount assigned to one share in the company’s capital records?
- Which action is a normal ownership right associated with ordinary voting equity shares?
- Which investor is an institutional investor rather than an individual public shareholder?
- A company issues 20,000 shares at ₹35 each with ₹10 face value. What is the total securities premium?
- A company has 80,000 issued shares of ₹10 each, with ₹8 paid per share. What is its paid-up capital?
- A declared dividend is 40% of ₹5 face value. What gross dividend is payable on 750 fully paid shares?
- An investor holds 900 shares before a bonus issue of one new share for every three held. What is the new holding?
- An investor holds 240 shares of ₹10 face value. Each splits into five ₹2 shares. What happens to the holding?
- An investor holds 1,000 shares at ₹180 each. Five shares are consolidated into one. Assuming no other change, what is the adjusted holding?
- A company has 10 lakh shares. It buys back and cancels 2 lakh. An investor keeps 40,000 shares. What is the investor’s new ownership percentage?
Key ideas
From the practice bank · 1
Which term describes the nominal amount assigned to one share in the company’s capital records?
Face value is the nominal amount assigned to a share in the company’s capital records. Remember: Face value and market price measure different things.
Hint The amount in the capital record need not equal the exchange price. Common mistake: Using the share’s trading price as its face value.
II-A-011From the practice bank · 2
Which action is a normal ownership right associated with ordinary voting equity shares?
Voting on eligible shareholder resolutions is a normal right of ordinary voting equity holders. Remember: Voting rights let shareholders participate in specified company decisions.
Hint Ownership rights operate through formal company decision-making processes. Common mistake: Confusing shareholder rights with day-to-day management powers.
II-A-012From the practice bank · 3
Which investor is an institutional investor rather than an individual public shareholder?
A pension fund is an institutional investor because it invests pooled retirement assets through an institution. Remember: Institutional investors invest through organised investment entities.
Hint Distinguish an investment institution from a person investing personal savings. Common mistake: Classifying an investor only by the size of a personal investment.
II-A-013From the practice bank · 4
A company issues 20,000 shares at ₹35 each with ₹10 face value. What is the total securities premium?
The securities premium is ₹5,00,000. Premium per share = ₹35 − ₹10 = ₹25. Total premium = 20,000 × ₹25 = ₹5,00,000. Remember: Issue proceeds contain nominal capital and any premium.
Hint Only the part of the issue price above nominal value forms the premium. Common mistake: Calling the full issue price a premium.
II-A-014From the practice bank · 5
A company has 80,000 issued shares of ₹10 each, with ₹8 paid per share. What is its paid-up capital?
Paid-up capital is ₹6,40,000. Calculation: 80,000 shares × ₹8 paid per share = ₹6,40,000. Remember: Paid-up capital counts the nominal amount paid on issued shares.
Hint Use the amount actually paid per issued share, not the maximum nominal amount. Common mistake: Multiplying issued shares by face value when the shares are only partly paid.
II-A-015From the practice bank · 6
A declared dividend is 40% of ₹5 face value. What gross dividend is payable on 750 fully paid shares?
The gross dividend is ₹1,500. Dividend per share = 40% × ₹5 = ₹2. Total dividend = 750 × ₹2 = ₹1,500, before any applicable tax deduction. Remember: A dividend percentage stated on face value is not a percentage of market price.
Hint Find the dividend on one share before applying the holding size. Common mistake: Using market price to calculate a face-value-based dividend.
II-A-016From the practice bank · 7
An investor holds 900 shares before a bonus issue of one new share for every three held. What is the new holding?
The new holding is 1,200 shares. Bonus shares = 900 ÷ 3 = 300. Total holding = 900 + 300 = 1,200 shares. Remember: Bonus shares are added to shares already held.
Hint Add the bonus entitlement to the original holding. Common mistake: Reporting only the new bonus shares as the total holding.
II-A-017From the practice bank · 8
An investor holds 240 shares of ₹10 face value. Each splits into five ₹2 shares. What happens to the holding?
The investor holds 1,200 shares with total face value of ₹2,400. New quantity = 240 × 5 = 1,200. Total face value = 1,200 × ₹2 = ₹2,400. Remember: A stock split preserves the holding’s total face value.
Hint A split changes the number and face value per share, not total nominal capital. Common mistake: Assuming a split by itself creates extra nominal capital.
II-A-018From the practice bank · 9
An investor holds 1,000 shares at ₹180 each. Five shares are consolidated into one. Assuming no other change, what is the adjusted holding?
The adjusted holding is 200 shares at a theoretical ₹900 each. Quantity = 1,000 ÷ 5 = 200. Price = ₹180 × 5 = ₹900, leaving theoretical value at ₹1,80,000. Remember: A consolidation reduces quantity and proportionately raises the theoretical price.
Hint Preserve the theoretical total value while applying the consolidation ratio. Common mistake: Applying the split rule to a consolidation.
II-A-019From the practice bank · 10
A company has 10 lakh shares. It buys back and cancels 2 lakh. An investor keeps 40,000 shares. What is the investor’s new ownership percentage?
The new ownership percentage is 5%. Remaining shares = 10 lakh − 2 lakh = 8 lakh. Ownership = 40,000 ÷ 8,00,000 × 100 = 5%. Remember: Cancellation can increase a continuing holder’s percentage without increasing their share count.
Hint The investor’s share count stays the same while total outstanding shares fall. Common mistake: Keeping the old outstanding-share denominator after a buyback.
II-A-020