UK Capital Appreciation

UK Capital Appreciation

UK Capital appreciation

(c)Share division. Share division into smaller nominal units is usually decided by the board when the market price of the share reaches a height which deters small investors from buying. The division gives the share a better marketability. A share of £1 par value with a market price of £120s is divided into four shares with a par value of £5 each; market price then becomes £5O on the day of the division. You can be sure that should the company continue to prosper, the pace in the rise of the market price is quickened by the psychological effect of the illusory cheapness of the price; a thriving company with such an unusually low price results in investors 'chasing' the share on the market with the inevitable rise occasioned by the demand.

'Scrip' or 'Rights' issues, or share division do not in themselves give rise to an Increase in the value of shares.

They are often concomitant effects, but not contributory causes of the continuing prosperity of a company.

DISTRIBUTION OF by the company from time to time. These, being paid out in cash, do not specifically add capital appreciation to your holding in the company concerned, but are a cash bonus of a capital nature, and, if reinvested, effectively add to the overall worth of your invest merit outlay.

Generally distribution of capital profits can only be made from realised capital gains made by the company on its ted assets, e.g., profits on sale of land, plant, investments, etc. afflation. Inflation has two effects in causing capital appreciation of your holding-.

(a)The natural increase in the figure of profits of the company due to the fall in the value of the £ results in a continually increasing figure for the amount being ploughed back (i.e., retained) each year; thus the capital sum employed is continually rising and the market price of the shares keeps pace.

(b)When the company's fixed assets are revalued to keep balance-sheet values in line with current inflated prices, the effect is an immediate increase in the figure of the capital employed (or the company's reserves), and this Is reflected in an increased market price.

The greater the decline in the value of money, the greater the rise in share values as with any other property. £1 'Legal and General Assurance' share has risen from £2 £5 in 2004 to £9 in 2008 (appreciated 21 times in eight years) which led to the division in 2003 of the share into four Ss each.

4. OTHER FACTORS- - RAISE Market PRICES Cause capital appreciation of your holdings. These may concern one corn-patty, e.g., 'Takeover' bid or one introductory, e.g., oil, when there is increased national or world demand for oil and its products, or the whole market, e.g., a general election resulting in a government of the 'Bight'.

Of equal importance to capital appreciation, as a main purpose of investment, is Income.


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