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Mario, a financial consultant, made a presentation on ordinary and preference shares - NSC Business Studies - Question 8 - 2019 - Paper 1
Question 8
Mario, a financial consultant, made a presentation on ordinary and preference shares. The presentation also addressed factors that need to be considered when making ... show full transcript
Worked Solution & Example Answer:Mario, a financial consultant, made a presentation on ordinary and preference shares - NSC Business Studies - Question 8 - 2019 - Paper 1
Step 1
Differentiate between ordinary and preference shares.
Answer
Ordinary shares and preference shares are both types of equity instruments offered by a company. Ordinary shares represent a stake in a company and provide voting rights at the Annual General Meeting (AGM). Shareholders of ordinary shares receive dividends that are not fixed and depend on the company's performance, allowing them the potential for higher returns, especially if the company performs well.
Preference shares, on the other hand, often offer fixed dividends and are prioritized over ordinary shares when it comes to dividend payments and liquidation. Preference shareholders generally do not have voting rights but benefit from additional financial stability since they receive dividends before ordinary shareholders and may also have cumulative dividend rights.
Step 2
Discuss the following factors that must be considered when making an investment decision: Risk
Answer
Risk refers to the potential for an investment to lose value over time due to various uncertainties. The higher the potential return on investment, the greater the risk associated. Investors should assess their risk tolerance and consider the likelihood of loss versus potential gain.
Step 3
Discuss the following factors that must be considered when making an investment decision: Taxation
Answer
Taxation involves understanding the compulsory payments made to the government that can affect investors. Different investment types may yield different after-tax returns, so it is vital for investors to comprehend the tax implications and plan accordingly to maximize returns after taxes.
Step 4
Discuss the following factors that must be considered when making an investment decision: Investment period
Answer
The investment period is the duration for which an investment is held. It influences both risk and potential returns, as longer investment periods can often reduce volatility and align with long-term financial goals. Investors should evaluate their needs and consider how the investment horizon fits within their overall financial strategy.
Step 5
Explain to Mario the factors that he should consider during a presentation.
Answer
Mario should establish credibility at the onset by introducing himself confidently. He must avoid excessive rambling and engage the audience, using varied media to maintain interest. Clear structure is essential; he should outline key points at the start. Furthermore, he should incorporate feedback received to enhance clarity and engagement in his presentation.
Step 6
Recommend ways in which Mario can improve on his next presentation.
Answer
To improve future presentations, Mario should revise objectives to ensure they are clear and achievable. Continuous updates on relevant information are vital. He should reflect on the use of visuals, optimizing them for clarity and removing those that do not serve the purpose. Logical organization of content is important, and maintaining audience engagement through stories or examples can significantly enhance the delivery.