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INVESTMENT  acquisition of capital assets, (buildings, machinery, stocks, bonds and shares) SHARES  part ownership of a company BROKER  licensed.

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Presentation on theme: "INVESTMENT  acquisition of capital assets, (buildings, machinery, stocks, bonds and shares) SHARES  part ownership of a company BROKER  licensed."— Presentation transcript:

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3 INVESTMENT  acquisition of capital assets, (buildings, machinery, stocks, bonds and shares) SHARES  part ownership of a company BROKER  licensed member of the stock exchange who trade securities BROKERAGE  fees charged by a stockbroker for his professional service BROKER’S NOTE  serves as proof that shares have been purchased. SHARE CERTIFICATE  shows the number of shares which a shareholder owns

4 DIVIDEND a portion of the company’s profit given as reward to a shareholder for the investment VOTING given the right to participate in important decisions, like choosing directors. BLUE CHIP SHARES shares in a company that is performing well in terms of profitability and stability PORTFOLIO a collection of investments belonging to an investor INTEREST RATE percentage that will be earned on an investment or paid on borrowed money

5 ? How can a business invest internally in their business to become more successful?

6 Investing in vision and mission by building confidence in it’s g&s Investing in latest technology (physical capital) Investing in expert and productive personnel (human capital) Investing in comprehensive marketing to maintain market share

7 Range of opportunities for profitable financial returns Investing in property or other assets Get holding and controlling interest in other businesses

8 Formal market where the public companies that have been listed trade their shares. Provide to SA’s economy by providing a market for securities and creating new investment opportunities Main function  to direct capital into productive economic activity through shares. Prices of shares are determined by supply and demand

9 Provide opportunities for financial institutions to invest their money Provide a market for share transactions Follow strict rules to prevent fraud Publishes share prices daily – public stay informed Small investors can invest by buying shares in big companies

10 Buy shares to receive dividends Buy shares at lower price and sell at higher prices to make profit

11 Trading takes place through a stockbroker. These stockbrokers advise on stock investment issues like when and which shares to buy. These transactions are done via computer programmes on the Internet. Stockbrokers charge their customers brokerage and taxes. Once a share is bought you will receive a broker’s note and then a share certificate to say that you own the shares.

12 ORDINARY SHARES Standard shares with no special rights or restrictions. High gains (dividends) but high risk Dividends are not guaranteed – if profits are small no dividends will be paid Last to be paid if company closes down BONUS SHARES Shares are held back and issued as dividends at a later stage or they put them towards special funds. PREFERENCE SHARES Receive a fixed rate of dividend Paid before other shareholders are paid Even if profits are large, still only get dividends at fixed rate Ordinary preference shares  only receive dividends if there are profits to divide Cumulative preference shares  dividends accumulate for the future if they are not paid out in the current year. Non-cumulative preference shares  do not accumulate any dividends for the future Participating preference shares  receive regular dividends and also share in surplus profits Non-participating preference shares  do not carry the right to participate in excess pofits.

13 Shows higher returns than bank deposits and property Provide solid returns at retirement age Values of shares increase as companies expand You get profits from companies in the form of dividends

14 Share prices can rise or fall within seconds and investors might not have time to sell their shares before they become worthless Share performance and price are linked to many forces which are out of the control of the investor

15 The portfolio is divided into equal ‘units’ – the investor receives a certain amount of units for the money they have invested. The trust does not give share to investors, but combines them in a portfolio. Management company buys blue chip shares at JSE with money from thousands of investors.

16 Anyone can purchase units There is professional investors that ensure maximum capital and income growth Medium to long- term investments – provide for future needs Direct access to money invested – give written instruction to sell your units within 3-5 working days

17 Same risks as shares, but companies have better track records If blue chip companies do not continue to grow, the unit trust will also be affected and will not give expected returns.

18 Invest R1000 to R1 million for a period of 2, 3 or 5 years on a fixed interest. Interest is paid out every 6 months (March 31 and September 30) directly into buyer’s bank account. The only way to lose on this investment is in the case of political or economical chaos (war)

19 Safety  paperless, everything is done electronically Guaranteed returns  you will get fixed interest for the whole investment period. No risk  cannot be used as security for loans or sold in the market Convenience  easy to invest – electronically or at the post office Accessibility  can make early withdrawals after 12 months, but will pay penalties if there is less than R1000 left in the Bond No charges

20 UNIT 3 – Page 237

21 RETURNS  Returns on investment is the earnings on the capital invested. DIVIDENDS  Shareholders receive dividends from the shares they bought.  Directors decide to distribute some profits to shareholders.  Profitability of company will determine the dividend.  Type of share will determine the certainty of receiving dividends. INTEREST  Reward the investor receives for giving up the use of their money for a certain period of time.  Long-term investments – higher rate of interest.  Must consider the risk on investments

22 UNIT 4 – Page 238

23 SIMPLE INTEREST interest calculated on the original amount only. COMPOUND INTEREST interest calculated using the original amount and all of the accumulated payments added into the formula. PRINCIPAL the original amount invested

24 The PRINCIPAL remains the same over the entire period of investment. Interest earned is kept separate unless it is reinvested. Formula: P x R x n P = principal R = rate of interest n = time in years or months

25 Arthie invested an amount of R3 000 at the bank for a period of three years. The interest rate quoted was 4% simple interest. Calculate the interest earned. Calculation: A= P(1+ixn) A = R3000(1+4x3) The interest is R360 The value of the investment is R3000 + R360 = R3 360

26 The PRINCIPAL grows with the addition of interest to it. Interest is calculated on the new (higher) principal and again added to it.

27 Arthie invested an amount of R3 000 at the bank for a period of three years. The interest rate quoted was 4% simple interest. Calculate the interest earned. Total amount received back = R3374.60 PrincipalYearInterest R3000R3 000 x 4/100R120 R3120R3120 x 4/100R124.80 R3244.80R3244.80 x 4/100R129.80

28 Formula: Arthie invested an amount of R3 000 at the bank for a period of three years. The interest rate quoted was 4% simple interest. Calculate the interest earned.


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