Frequently Asked Questions
A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. This entitles the owner of the stock to a proportion of the corporation’s assets and profits equal to how much stock they own. (Investopedia)
Investing is the act of putting aside money now to reap the benefits in the future, stocks are one method of making this kind of investment. To Invest in the Jamaica stock exchange you will need to register with a brokerage, deposit the money and purchase a stock.
Brokers are intermediaries who have the authorization and expertise to buy securities on an investor’s behalf. There are 13 brokers that allow for the purchasing of stocks on the Jamaica stock exchange (JSE), seven of these brokers enable us to use the JTraderPro service, this platform allows individuals to buy and sell shares on the market completely independently of a brokers decision or a financial advisor. This platform allows for an individual to instantly trade stocks within market hours as they please according to their own portfolio needs. JMMB has its own online or brokerage platform which works similarly with slight differences to the operations and interface called Moneyline.
This is up to your choice based on convenience and personal preference, however, some brokers have differences in terms of opening amounts and differences in commission fees.
Most brokers will tell you the opening balance is $10,000 JMD, however, other brokers such as Mayberry Investments have different opening requirements, Mayberry’s, in particular, is $1,000,000JMD.
Standard requirements to open a brokerage account with an investment firm are:
1: Valid photo ID
2: Proof of address
3: Tax Registration Number ( TRN)
4: Two references
5: Proof of income.
6: Starting capital
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders securities called rights. With the rights, the shareholder can purchase new shares at a discount to the market price on a stated future date. The company is giving shareholders a chance to increase their exposure to the stock at a discount price. (Investopedia)
A stock split means that existing shareholders receive additional shares, but the value of the shares will not increase due to the stock split. (Investopedia)
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. (Investopedia)
Money is made on the stock exchange by buying a stock at X price and selling it for a higher value than what it was purchased for.
In Jamaica, we do not have a capital gains tax which means that we do not pay taxes on the gains/ advancement our stocks have made. We have GCT on the individual transactions when a stock is bought/sold. Dividends for companies domiciled in Jamaica are also taxed.
Dividends represent the distribution of corporate profits to shareholders, based upon the number of shares held in the company. Shareholders expect the companies that they invest in to return profits to them, but not all companies pay dividends. (Investopedia)
Dividends can be paid out in cash, by check or electronic transfer, or in stock, with the company distributing more shares to the investor.
- Suppose Company A’s stock is trading at $20 and pays annual dividends of $1 per share to its shareholders. Suppose that Company B’s stock is trading at $40 and also pays an annual dividend of $1 per share.
- This means Company A’s dividend yield is 5% ($1 / $20), while Company B’s dividend yield is only 2.5% ($1 / $40). Assuming all other factors are equivalent, an investor looking to use their portfolio to supplement their income would likely prefer Company A over Company B because it has double the dividend yield (Investopedia)
You can enroll in a course on the Corporate Finance Institute website.
The income statement breaks down the revenue a company earns against the expenses involved in its business to provide a bottom line, net income profit or loss. The income statement is broken into three parts which help to analyze business efficiency at three different points. It begins with revenue and the direct costs associated with revenue to identify gross profit. It then moves to operating profit which subtracts indirect expenses such as marketing costs, general costs, and depreciation. Finally it ends with net profit which deducts interest and taxes.
The balance sheet is a report of a company’s financial worth in terms of book value. It is broken into three parts to include a company’s assets, liabilities, and shareholders’ equity. Short-term assets such as cash and accounts receivable can tell a lot about a company’s operational efficiency. Liabilities include its expense arrangements and the debt capital it is paying off. Shareholder’s equity includes details on equity capital investments and retained earnings from periodic net income. The balance sheet must balance with assets minus liabilities equaling shareholder’s equity. The resulting shareholder’s equity is considered a company’s book value. (Investopedia)
The cash flow statement provides an overview of the company’s cash flows from operating activities, investing activities, and financing activities. Net income is carried over to the cash flow statement where it is included as the top line item for operating activities. Like its title, investing activities include cash flows involved with firmwide investments. The financing activities section includes cash flow from both debt and equity financing. The bottom line shows how much cash a company has available.