Fundamentals Of Finance

Running head: FUNDAMENTALS OF FINANCE
Fundamentals of finance
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FUNDAMENTALS OF FINANCE1
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................2
Question 3........................................................................................................................................3
Question 8........................................................................................................................................4
Question 9........................................................................................................................................4
Question 10......................................................................................................................................4
Question 11......................................................................................................................................5
Question 12......................................................................................................................................5
Reference.........................................................................................................................................6

FUNDAMENTALS OF FINANCE2
Question 1
Rights and advantages for shareholders
Common shareholders are considered as the owners of the entity and hence have
particular privileges as well as rights those are governed through laws that prevails in the state in
which the entity operates. Most crucial rights the shareholders have include right in sharing the
entity’s profitability, assets and earnings, level of control and influence on the decision taken by
the management (Gregg, 2017). Various advantages available to shareholders are as follows –
 Stock appreciation – major advantage of buying the stock is that stock has potential of
appreciating over the period of time. Further, the shareholder may offer the stock for
sale at any time (Pearce, 2015).
 Dividends – it is periodic payment that is provided by some of the entities to its
shareholders based on the profits of the entity. Stocks that pay dividends may provide
steady source for earning for the shareholders without requiring them to sell or buy the
shares and presents alternative to money saving for interest bearing accounts as well as
buying bonds.
 Decision making – another advantage is shareholder is able to influence the decision in
entity that issues the stock that can affect the share’s value.
 Other benefits – entities those issue the stocks may allow the shareholders different
other benefits. For instance, shareholders can be granted special discounts for the
products as well as service those are offered by the entity. Particular benefits for the
shareholders changes from one entity to another (Pearce, 2015).
Question 2
Standard and Poor’s 500 and Dow Jones Industrial average both indices track particular
entities for creating overall picture of stock market. It assists he investors to understand present
state of the American economy. Major difference among them is in the number of holdings as
well as the methodology for weighing (Auer & Schuhmacher, 2015). Other differences are –
 Dow jones average is generally industrial component of series for averages that is
compiled by entities that publishes Wall Street Journal. Industrial average at present has
30 stocks. Conversely, S&P is specialized in reporting in context of activities and issues