Stocks

Offer (Ask)

If you are buying shares you always pay the ask price (the higher price), and if you are selling shares you receive the bid price (the lower price). There is always a gap between the bid and ask prices, and this gap is called the spread.

Bid/offer spread

If the bid price is $10 and the offer (ask price) is $9 then the spread is $1. The bid-ask spread in currency trading is usually the smallest due to the enormous liquidity of the foreign exchange market. Less liquid assets such as penny dreadful stocks will have wider spreads due to the lack of…

Dividends

The term “dividend” refers to the amount paid out of a company’s profits to its shareholders. In Australia it is common practice to pay both an interim and a final dividend. Earnings not distributed in the form of dividends are retained in the business and help it to grow. They still belong to the shareholders…

Dividend imputation

Before 1 July 1987 corporate profits were subject to two lots of tax. Firstly, companies paid company tax on their earnings. Only the “after tax” earnings were then available for dividend declarations. Secondly, individual shareholders paid personal income tax on any dividends received by them, despite the fact that the companies paying them had already…

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