BUSINESS MATHEMATICS-I

Chapter1: Shares
Inputs:
• Concept of shares, Types of Shares, face Value, Market Value, Dividend.
• Equity Shares, Preferential Shares, Bonus shares and problems on shares.

Notes:
• SHARES: A share is the smallest unit of the capital of a company.
• Stock is the American term for share .
❑ Example: A Company decides to raise a capital of Rs. 10 Crores.
This amount can be divided into 10 lakh shares i.e. each share
is of Rs. 100. Or it can be divided into 1 crore shares each of Rs.
10.
 Usually a share is of values Rs. 100 or Rs. 50 or Rs. 10 or Rs. 5 or Rs. 2 or
Rs. 1 This values of the shares are called as face value.
 Face Value or Nominal Value or Par Value:
It is the value of the share printed on the share certificate.(N.V.)
 Dividend: The shareholders share the profits (if any) of the company.
This is called as dividend.
 Types of Shares:
Shares are mainly of two types: (i) Preference Shares
(ii) Equity Shares / Ordinary Shares
(i) Preference Shares:
 Shareholders that have a priority over the equity shares.
 Given preference as regards to payment of dividend and
repayment of capital.
 They do not Enjoy voting rights.
 These shareholders are given a dividend at a fixed rate.
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(ii) Equity Shares:
 These shareholders are also known as ordinary shares.
 They do not enjoy any preference regarding payment of
dividend and repayment of capital
 enjoy voting rights
 Given dividend at the fluctuating rate (Higher the profits
higher will be the dividend)
 The place at which the shares are bought and sold is called a share
market or a Stock Exchange
 The price at which a share or stock is traded is called its market price for
the market value.(M.V.)
 A Share is said to be:
 at premium or above par if its market value is more than its face
value.(𝑀𝑉 > 𝑁𝑉)
 at par if its market value equals its face value (𝑀𝑉 = 𝑁𝑉)
 at discount or below par if its market value is less than its face
value. ( 𝑀𝑉 < 𝑁𝑉)

Formulas:
1. 𝑭𝒂𝒄𝒆 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆𝒔 = (𝒇𝒂𝒄𝒆 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆) × (𝑵𝒐. 𝒐𝒇 𝒔𝒉𝒂𝒓𝒆𝒔).
𝑭𝒂𝒄𝒆 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆𝒔
2. 𝑵𝒐. 𝒐𝒇 𝒔𝒉𝒂𝒓𝒆𝒔 =
𝒇𝒂𝒄𝒆 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆

3. 𝑴𝒂𝒓𝒌𝒆𝒕 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆𝒔 = (𝒎𝒂𝒓𝒌𝒆𝒕 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆) ×

(𝑵𝒐. 𝒐𝒇 𝒔𝒉𝒂𝒓𝒆𝒔)
𝑴𝒂𝒓𝒌𝒆𝒕 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆𝒔
4. 𝑵𝒐. 𝒐𝒇 𝒔𝒉𝒂𝒓𝒆𝒔 =
𝒎𝒂𝒓𝒌𝒆𝒕 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆

5. 𝑻𝒐𝒕𝒂𝒍 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆 × 𝑵𝒐. 𝒐𝒇 𝒔𝒉𝒂𝒓𝒆𝒔

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒆𝒓 𝟏 𝒔𝒉𝒂𝒓𝒆
6. 𝑹𝒂𝒕𝒆 𝒐𝒇 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = × 𝟏𝟎𝟎
𝑭𝒂𝒄𝒆 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆

𝑻𝒐𝒕𝒂𝒍 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅
7. 𝑹𝒂𝒕𝒆 𝒐𝒇 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅 = × 𝟏𝟎𝟎
𝑭𝒂𝒄𝒆 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆

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Some Points To remember:
1. If the face value of a share is not mentioned in the problem, we will
assume it to be Rs. 100.
2. A “5% share at 120” or “5% stock at 120” means a share (with face value
Rs.100) with a 5% dividend (on the face value) and whose market price
120.
3. “A share at Rs. 10 premium” or “ A share at Rs. 10 above par” means a
share with face value Rs.100 and Market value Rs.110.
4. “A share at Rs. 10 discount” or “ A share at Rs. 10 below par” means a
share with face value Rs.100 and Market value Rs.90.

Examples:
Qn-1: A person bought 120 shares at market value of Rs. 375 each.
Calculate the sum he paid.
Qn-2: Suresh bought 1 share of face value Rs. 100, for Rs.2000. If the
company declared a dividend of 300%. How much total dividend he will
receive.
Qn-3: An industry has issued 60,000 shares of face value Rs.10 each. The
company declared a total dividend of Rs. 72,000. Find the rate of dividend
paid by the company.
Qn-4: A writing industry issued some shares of face value Rs.10 each. A
dividend of Rs. 7,500 was declared by the company at 2.5% per share. Find
the number of shares issued by the company.
Qn-5: A company declared an annual dividend of 8%. Find the annual
dividend of Mr. Menon who owns 230 shares of the company of face value
Rs. 100 each.
Qn-6: A person had 600 preference shares and 400 ordinary shares of a
company of Rs. 10 each. The company declared a 10% annual dividend on
the preference shares and a 12% annual dividend on the ordinary shares.
What was the total annual dividend received by that person?
Qn-7: A company’s capital is made up of 80,000 preference shares with 10%
dividend and 60,000 ordinary shares. The par value of each share of either
type is Rs. 100. In the year 2013-14, the company had a total profit of Rs.
18,80,000 out of which Rs. 3,00,000 were kept in reserve fund and the

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 remaining was distributed to the shareholders. What was the rate of
dividend distributed to the ordinary shareholders?
Qn-8: Find the face value of a share if an investment of Rs. 9,00,000 put in
to purchase 8% shares at Rs. 15 each, each earned a total dividend of Rs.
9,600.

Buying and selling of shares involving Brokerage:

 The shares can be purchased and sold only through authorized brokers.
 They charge a commission on the purchase and the sale of shares, which
is called brokerage.
 The brokerage is charged as a percentage on the market price.
 The brokerage is charged separately for the purchase and separately for
the sale of shares.
 While purchasing the brokerage is added to the market price.
 While selling, the brokerage is subtracted from the market price

Formulae for Brokerage:

𝑹𝒂𝒕𝒆 𝒐𝒇 𝒃𝒓𝒐𝒌𝒆𝒓𝒂𝒈𝒆
1. Brokerage per share = × (𝑴𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆)
𝟏𝟎𝟎
𝑹𝒂𝒕𝒆 𝒐𝒇 𝒃𝒓𝒐𝒌𝒆𝒓𝒂𝒈𝒆
2. Brokerage of all shares= × 𝒎𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆𝒔
𝟏𝟎𝟎
𝑹𝒂𝒕𝒆 𝒐𝒇 𝒃𝒓𝒐𝒌𝒆𝒓𝒂𝒈𝒆
= 𝟏𝟎𝟎
×
(𝒎𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆 × 𝑵𝒐. 𝒐𝒇 𝒔𝒉𝒂𝒓𝒆𝒔)

3. Purchase cost of 1 share = market price of 1 share + brokerage per share

4. Total investment = Purchase cost of all shares = Purchase cost of 1 share ×no of shares.
5. Amount received on the sale of 1 share = Market price of 1 share – Brokerage
per share.
6. Gain on 1 share = (Amount received on the sale of 1share) – (purchase cost of 1
share)
7. Loss on 1 share = (purchase cost of 1 share) - (Amount received on the sale of
1share)
𝒕𝒐𝒕𝒂𝒍 𝑮𝒂𝒊𝒏
8. Rate of return on investment = × 𝟏𝟎𝟎.
𝑻𝒐𝒕𝒂𝒍 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆 𝒄𝒐𝒔𝒕 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆𝒔
9. No. of shares purchased =
𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆 𝒄𝒐𝒔𝒕 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆

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 𝑨𝒎𝒐𝒖𝒏𝒕 𝒓𝒆𝒄𝒆𝒊𝒗𝒆𝒅 𝒐𝒏 𝒔𝒂𝒍𝒆 𝒐𝒇 𝒂𝒍𝒍 𝒔𝒉𝒂𝒓𝒆𝒔
10. No. of shares sold =
𝑨𝒎𝒐𝒖𝒏𝒕 𝒓𝒆𝒄𝒆𝒊𝒗𝒆𝒅 𝒐𝒏 𝒔𝒂𝒍𝒆 𝒐𝒇 𝟏 𝒔𝒉𝒂𝒓𝒆

Examples:
Qn-1: If the market price of a share with face value Rs. 100 is Rs. 130, how
many shares of the company can be bought for Rs. 3,263 brokerage being
0.4%
Qn-2: How many shares of market price Rs. 800 were sold for the amount of
Rs. 39,840, the brokerage being 0.4% ?
Qn-3: Nisha bought the shares of Essar Oil at market value of Rs. 300 per
share from G.B. Stockbrokers. Within a week, she sold the shares at the rate
of Rs. 200. If the brokerage charged by her brokers is 0.4% and if Nisha did
not receive any other benefits like dividend or bonus shares from the
company, find the number of shares traded by her, if her net loss in the deal
was Rs. 4284.
Qn-4: A person sold 50000 shares of Rs. 10 at a price of Rs. 23 and paid
0.35% brokerage. What was the amount received by him ?
Qn-5: Mr. Chopra bought 400 shares of par value Rs. 10 each at the market
price of Rs. 24 each. If the annual dividend distributed was at the rate of
12%, find Mr. Chopra’s rate of return on investment.
Qn-6: Two companies A and B have shares with face value of Rs. 100 each
and the market price of their shares are Rs. 132 and Rs. 140 respectively. If
the dividend declared by A is 16% and the company B is 18%, which
company is a ‘better’ buy ?
Qn-7: A new investor in the share market is shown the following chart.
Guide the investor on the basis of dividend

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 Shares Dividend
Company
Face value Market Value declared

A 2 102 400%

B 10 65 90%

C 100 450 60%

Bonus Shares
 One way of passing the profit to the shareholders is in the form of
dividends.
 The other way of passing the profit by the company to their
shareholders, is to reward with bonus shares.
 These bonus shares are free of cost to the existing shareholders and
given in proportion to the number of shares held by them.
❑ Example: A company may give 3 bonus shares for every shares held by
its shareholders.
𝟑
i.e. if a shareholder has 15 shares, then he gets 15× = 𝟗 bonus shares.
𝟓

Splitting of Shares:
 Sometimes companies split the face value of a share and break it up
into smaller units.
 For e.g. a share of face value Rs. 100 is broken up into 10 shares of face
value Rs.10.

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Questions for Tutorials:
Q.1: Company has issued 500 shares at face value Rs. 10 each. The company
declare a dividend of Rs. 2700. Find the rate of dividend paid by the company?
Ans: 54%
Q.2 Find the number of shares if the total dividend is 8% on the shares with
face value Rs. 10 was Rs. 240?
Ans: 300
Q.3 Find the total Dividend at 6% on 240 shares of face value Rs. 100 each?
Ans: 1440
Q.4 Find the total dividend at 9% on 3000 shares of face value Rs. 2 each?
Ans: 540
Q.5 Find the number of shares if total dividend of 18% on face value Rs. 100
shares was Rs. 4590?
Ans: 255
Q.6 A company issued 50000 shares of face value Rs. 10 each. The company
declared a total dividend of Rs. 55000. Find the rate of dividend paid by the
company?
Ans: 11%
Q.7 An investor spend Rs. 32898.40 to purchase 400 shares at market price
Rs.82 each through a broker. Find the rate of brokerage?
Ans: 14.75%
Q.8 A company had issued 60000 shares at face value Rs. 10 each. The
company declared a total dividend Rs. 72000 Find the rate of Dividend paid by
the company?
Ans: 12%
Q.9 A company declared annual dividend of 8%. Find the total dividend of an
investor who has 230 shares of the company with Face value Rs. 100 each?
Ans: Rs. 1840

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Q.10 Find the total dividend at 10% on 340 shares of face value Rs.100 each
Ans: 3400
Q.11 Find the total dividend at 6% on 240 shares of face value Rs.10 each
Ans: 144
Q.12 Find the number of shares if the total dividend was Rs. 240 on the shares
of face value Rs. 10 and the rate of dividend was 8%
Ans: 300
Q.13 Find the number of shares if the total dividend was Rs. 4590 on the shares
of face value Rs. 100 and the rate of dividend was 18%
Ans: 255
Q.14 Find the total dividend and the rate of return on investment if Rs.36800
were invested in the shares with face value RS.10, Market value Rs.80 and the
rate of return was 30%
Ans: 1380, 3.75%
Q.15 An investor sold 600 shares at market price Rs.33 each and brokerage
0.5% Find the amount received by him
Ans: 19701
Q.16 An investor sold 150 shares at market price Rs. 450 each with brokerage
0.3%. Find the amount received by him
Ans: 67297.50
Q.17 How many shares of market value Rs. 120 each can be purchased for Rs.
60180, brokerage being 0.3%.
Ans: 500
Q.18 An investor bought 120 shares at market price Rs. 375 each with
brokerage 0.4%. Calculate the amount required for this transaction.
Ans: 45180
Q.19 An investor sold 200 shares at market Price Rs. 40 per share with
brokerage 0.3%. Find the amount received in this transaction.
Ans: 7976

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