It also serves an important secondary market role by providing a framework through which the ownership of existing shares can be bought and sold. The ASX also adopts a regulatory function confined to prescribing appropriate behaviour of the broker members of the exchange, and in ensuring that the companies seeking listing on the exchange, and those already listed, meet specified minimum levels of performance and standards of information disclosure. The ASX can impose sanctions on companies found guilty of transgressing the rules of the exchange by requesting compliance, suspending trading or delisting the company. The price of ordinary shares in a company listed on the ASX represents the opinion of investors as to the present value of the future net cash flows to be generated by the company. The more optimistic the evaluation of the company s future earnings prospects and subsequent growth, the greater will be the demand for it s shares, forcing the share price up.
Companies can raise equity capital through new share issues and rights issues.
Describe the role of share brokers. Describe how they work. Explain what the all ordinaries index is and how it is calculated. For your company, calculate the book value of the shares. Is this higher or lower than the share price.