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Companies need to know how they are performing in order to analyse problems, find solutions for these problems and make plans for the future.
To make an accurate analysis of the company’s situation I am going to try and define some financial terms that are useful to classify and oversimplify the company’s problems or situation.
These financial terms are the next: shares, assets, nominal share value, the dividend and its cover, price yield and to finish with the ratio price to earnings.
The first word to define is share .It is a small part of a company’s capital; a security representing a portion of the nominal capital of a company. What is most important is the stake contained in the share. The assets stands for something of value which is owned by a company, assets are resources of value to the firm to which it has exclusive rights of use. For example (raw materials, land, buildings, stocks)
Nominal share value originally represented the assets value of the enterprise.
There are some non-voting shares for certain companies which are usually named by the suffix A .The point of these shares, was to let the company control from being retained in the hands of the founding family. These kinds of shares are lower price than the others.
The dividend and its cover: the dividend is a percentage of profits paid to shareholders in proportion to the number of shares he owns. The cover is referred to the number of times that a company would pay its net dividend.
To continue with the explanation of these terms the next one is price yield, which is the percentage of the price received from the dividend. When the company gets profits, these are called the earnings. If the earnings are divided by the number of shares in existence, we get as a result earnings per share which really means the percentage market value of the share.
It is important to point out that not all earnings are paid as dividend. It is not obligatory to pay dividends when earnings exist because it may happen that the firm keeps them for their stock.
Getting to the end, the last financial word I will try to explain “yield”. It stands for the rate of income from a security as a proportion of its market price. Usually yields are lower than the interest. The reason for this is the fact that the acceptance of the higher risk entitles a higher return for the shareholder.
To finish with, I have tried to explain these financial words which are usually used when talking about the performance of a company.
As a conclusion I would say that they are all necessary when talking about financial situations and to understand the real meaning of the 3 financial statements.

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