[00:00.00] Stocks and Shares

[00:04.10]In order to start a business

[00:08.33]a man must have to buy or rent factory or shop,

[00:14.71]to buy machinery and goods and to pay his workpeople.

[00:21.16]A man may sometimes be able himself

[00:26.20]to suppy all the money he needs for this;

[00:30.85]but often he cannot do so,

[00:35.60]and then he may ask others to help him by making contributions.

[00:42.06]Money supplied in this way is called capital,

[00:47.12]and the people who supply it to him become members of this company.

[00:53.66]Of course they hope,when they lend their money in this wasy,

[00:59.40]that the man's business will make a profit;

[01:04.16]and when the company does begin to make a profit

[01:09.49]they all share in its profits-

[01:14.14]and the share each one gets is in proportion

[01:19.57]to the amount of capital he has supplied.

[01:24.32]Thus if Smith has supplied 1000 and Jones 2000,

[01:32.79]Jones's share of the profits will be twice as big as Smith's share.

[01:40.44]Another way fo saying that Smith and Jones

[01:45.48]supplied money to found the company

[01:49.84]is to say that they bought so many shares in its profits.

[01:55.80]Shares are usually divided into units of 25p,50p and 1.

[02:04.55]Let us suppose that in this company they are in units of 1.

[02:11.29]As the company was just being founded it probably happened that with 1000

[02:19.62]Smith was also to buy 1000 shares.

[02:25.37]However,when a company has grown and prospered

[02:31.12]and people start to sell their shares to others who want to buy them.

[02:37.26]a 1 share often costs more than 1.

[02:43.32]This is because people have the great faith

[02:47.86]in the company and they think that,

[02:51.91]because the profits of the company are likely to increase,

[02:57.84]it will be worthwhile to pay more than 1 for a 1 share.

[03:05.31]On the other hand ,if a company is not doing very well

[03:11.45]its shares may sell for their stated value-or very near it

[03:18.32]-and if it is doing badly

[03:22.27]its shares will sell for less than the stated value.

[03:27.80]It is obvious that people supply money to a company

[03:34.44]because they think it will take profits.

[03:39.59]These are paid out to shareholders at least once a year

[03:46.12]and are called dividends.

[03:50.27]If the company is doing well it may pay a divedent of,

[03:56.72]say,10p for every 1 share.

[04:02.47]This is often expressed not in pence per pound

[04:08.61]but as a percentage-in this case it would be 10%.

[04:15.37]The government-which also wants to borrow money from the public

[04:21.62]-almost always does so.

[04:25.38]Government stocks are called"gilt-edged",originally

[04:31.41]because the certificate on which the loan

[04:36.06]was recorded had a gold edge like those found on the pages of old books.

[04:44.21]Later the term"gilt-edged"came to have a wider meaning,

[04:51.16]standing for safety and security,

[04:56.10]the government being the one institution

[05:01.06]that would never fail to pay its debts.

[05:06.02]Normally the government promises to repay the money borrowed

[05:12.97]within or at a certain specified time.

[05:19.11]This often to applies to other kinds of stock,

[05:24.18]but hardly ever to shares.