Explanation

(i) Interest is the reward for capital as a factor of production . Interest is income that lenders (usually banks) make a loans
while profit is the reward for an entreprenuer as a factor of production, profit is the net result of a company's income.

(ii) Shares (Equity securities): An individual portion of the company's capital or a unit of capital measured by a sum of
money. When shares are fully paid, they can be converted into stock
Debenture: A document setting out the terms of loan to a company i.e. it is a certificate of indebtedness and bearing a
fixed rate of interest.

(iii) Ordinary shares: Also known as "Equity". These are shares whose holders received dividend only after the preference
shareholders have received dividend. They are regarded as risk bearer and not entitled to a fixed rate of interest.
Preference shares: These are share whose holders receive dividends at specific rates and ahead of ordinary dows
shareholders and also holders are not entitled to partake in the surplus in liquidation unless the Articles of Association
stipulate otherwise

(iv) Cumulative preference shares: These are preference shares in which unpaid arrears (i.e. arrears of previous years) of
dividends are accumulated yearly and must be fully paid from the profits of the subsequent years before ordinary
dividends are paid. They are carried forward.
Participating preference shares: These are shares which after receiving their nominal dividend also have the rightto
participate in the excess dividend after ordinary shares have been paid.

(v) CUM-DIV: Means the shareholder (buyer) will be entitled to the next dividend.
EX-DIV: Means the shareholder (buyer) will not be entitled to the next dividend

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