Grade 11 Share Market: Short Notes

11 ශ්‍රේණිය · 10 පරිච්ඡේදය · කොටස් වෙළෙඳ පොළ

62%

of Grade 11 term tests include it (38 of 61)

392

marks in past papers (40 questions)

10 min

full lesson with quick checks

🎯 What you'll learn

Explain shares, shareholders, market price and dividends
Find the number of shares bought and the annual dividend income
Calculate capital gain or loss and the sale value
Write income as a percentage of the investment
Compare shares with bank interest and solve reinvestment problems

Own a piece of a company

Ruwan in Kandy has saved Rs. 120 000. A tea company listed on the Colombo Stock Exchange sells shares at Rs. 30 each and paid Rs. 2 per share as dividend last year. Should he buy, or keep the money in the bank? This chapter gives you the maths to decide.

What is a share?

A company raises money by dividing its capital into many equal parts called shares. If you buy shares you become a shareholder: you own a small part of the company.Shares of listed companies are bought and sold at the stock exchange. The price on a given day is the market price. It goes up and down with demand.

Two ways shares earn money

1. Dividend: each year the company shares part of its profit, as so many rupees per share. Annual dividend income = number of shares × dividend per share.2. Capital gain: if you sell for more than you paid, the extra is a capital gain. If you sell for less, it is a capital loss.Capital gain = (selling price − buying price) × number of shares.

🧮 The key formulas

N = number of shares, I = amount invested, P = market price when buying, d = dividend per share, D = annual dividend income, S = selling price per share, G = capital gain.

N = I ÷ P D = N × d G = N × (S − P)

✏️ Shares and dividend

Nimali invests Rs. 48 000 in a company whose shares sell at Rs. 24. The company pays an annual dividend of Rs. 3 per share. Find (i) the number of shares (ii) her annual dividend income (iii) that income as a percentage of her investment.

1(i) Shares = 48 000 ÷ 24 = 2000.
2(ii) Dividend income = 2000 × Rs. 3 = Rs. 6000.
3(iii) 6000 ÷ 48 000 × 100% = 12.5%.

✅ (i) 2000 (ii) Rs. 6000 (iii) 12.5%

⚠️ Number of shares first

Examiners note that many students skip finding the number of shares and multiply the dividend per share by the money invested (75 000 × 2.50), or divide by the wrong price. Dividends are paid per share, so always find N = investment ÷ market price first.

✏️ Selling at a profit

Kasun buys 1500 shares at Rs. 40 each. A year later he sells them all at Rs. 46 each. Find his capital gain and write it as a percentage of the money he invested.

1Investment = 1500 × 40 = Rs. 60 000.
2Gain per share = 46 − 40 = Rs. 6.
3Capital gain = 1500 × 6 = Rs. 9000.
4Percentage = 9000 ÷ 60 000 × 100% = 15%.

✅ Rs. 9000, which is 15%

⚠️ Sale value is not the gain

1500 × 46 = Rs. 69 000 is the sale value: the money he receives. The capital gain is only the extra: 69 000 − 60 000 = Rs. 9000. Read the question carefully: 'income from selling', 'capital gain' and 'selling price per share' are three different answers.

Shares or the bank?

To compare, find the total return for the same period:shares: dividend + capital gainbank: interestAs a percentage: return ÷ amount invested × 100%.Remember that shares carry risk: the price can fall, and dividends are not promised. Bank interest is fixed.

📌 Remember

• Number of shares = investment ÷ market price. Find this first.• Dividend income = number of shares × dividend per share.• Capital gain = number of shares × (selling price − buying price).• Return % = (dividend + gain) ÷ investment × 100%.• Sale value, capital gain and price per share are different things.

🧾 Quick revision sheet

Shareholder	A person who owns shares, and so owns part of a company.
Market price	The price of one share at the stock exchange on a given day.
Number of shares bought	Investment ÷ market price
Annual dividend income	Number of shares × dividend per share
Capital gain	(Selling price − buying price) × number of shares
Capital loss	When shares are sold for less than they cost.
Dividend as a % of investment	Dividend income ÷ investment × 100%