Securities Written

Securities Written

Securities, written or printed documents of title giving the holder a right to property not in his possession. The term is normally used to denote investments generally and in particular refers to income-yielding marketable claims such as stocks and shares.

Classes of securities vary with the risk element. (a) Debentures are loans in joint-stock companies paying fixed rates of interest. (b) Preference shares also yield a fixed rate of interest; they have a prior claim to dividends over ordinary shares, and sometimes to repayment of capital on a winding-up. The dividend on cumulative preference shares 'accumulates' if it is not paid because profits are inadequate. (c) Ordinary shares, or 'equities' as they are commonly called, have no special rights to dividends; but they usually control the company as they have the voting rights at meetings of the company; if they carry no votes they are sometimes described as 'A' shares. Their value is represented by the net assets of the company (after deducting preference share capital). (d) Government stocks and local government stocks are often referred to as 'gilt-edged securities 'because they have been regarded as absolutely safe, although the medium-term and long-term loans suffer from the effects of inflation much more than equity shares. Gilt-edged securities can be split into (1)short-term loans such as Treasury bills; (2) medium-term and long-term loans, including the permanent loans such as Consols and the various dated stocks; and National Savings Certificates, Tax Reserve Certificates, Defence Bonds and Post Office Savings Bank deposits, which can be encashed at any time but which cannot he sold. (e) Other types of securities are bills, mortgages, assurance policies, shares and deposits in building societies, etc.

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