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Sir, in a limited company which issues shares, suppose it issues shares to the public via a stock exchange , then what amount of money do they get. For example itf they have authorised share capital of 500,000 shares and the par value is $1, then can they offer this amount of shares to the public. If the public buys the shares for $5 they buy it at market value, so the nominal share price goes to the share capital account, and where does the remaining market value price goes? What happens if the public sells it shares in the stock exchange?
Also, what is the relation of a stock exchange and a company?
Lastly, in the normal stock exchange, when there is trading going on, are the general public shareholders? And what type of shareholders are they? And do they receive dividend?
Please help me. thanks a lot.
When a company issues shares, they state the price at which they are being sold (whether they issue them through a stock exchange or not makes no difference).
The par/nominal value goes to the share capital account and the extra goes to the share premium account.
You are not required to know the workings of the stock exchange for Paper F3 (it is not relevant until Paper F9), but it is just like any market. There are lots of traders who buy shares from people who want to sell, and sell them to people who want to buy. They change the prices up and down to persuade people to buy and sell. Investors are buying and selling from each other (via the stock exchange) – it doesn’t affect the company.
But again, none of this is relevant for F3.
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