Level 1 — RecognitionShares, Ownership & Indices

Shares, Ownership & Indices

⏱ 20 minutes30 marksprintable — key stays hidden on paper

Chapter: 1.2 Shares, Ownership & Indices Difficulty Level: 1 — Recognition Time Limit: 20 minutes Total Marks: 30

Section A — Multiple Choice (1 mark each) [10 marks]

Choose the single best answer.

Q1. A share of a company primarily represents:

(a) A loan given to the company
(b) A unit of ownership in the company
(c) A guarantee of fixed annual income
(d) A tax receipt from the government

Q2. Which type of shareholder typically has voting rights at the Annual General Meeting?

(a) Preferred shareholders only
(b) Common (equity) shareholders
(c) Bondholders
(d) Company creditors

Q3. The face value (par value) of a share is:

(a) The price at which it currently trades on the exchange
(b) The nominal value assigned to the share in company records
(c) The dividend paid per share
(d) The book value of company assets

Q4. Dividend yield is calculated as:

(a) $\dfrac{\text{Market Price}}{\text{Dividend per Share}} \times 100$
(b) $\dfrac{\text{Dividend per Share}}{\text{Market Price}} \times 100$
(c) $\dfrac{\text{Face Value}}{\text{Market Price}} \times 100$
(d) $\text{Dividend per Share} \times \text{Number of Shares}$

Q5. In a 2-for-1 stock split, the number of shares held by an investor:

(a) Halves, and price per share doubles
(b) Doubles, and price per share halves
(c) Doubles, and price per share stays the same
(d) Stays the same, and price doubles

Q6. The Sensex is an index of how many companies?

(a) 50
(b) 30
(c) 100
(d) 500

Q7. The Dow Jones Industrial Average is an example of a:

(a) Free-float market-cap-weighted index
(b) Price-weighted index
(c) Equal-weighted index
(d) Debt index

Q8. A buyback of shares by a company results in:

(a) An increase in the number of outstanding shares
(b) A decrease in the number of outstanding shares
(c) Issuance of new shares to the public
(d) A change in face value only

Q9. Outstanding shares are best defined as:

(a) All shares a company is legally allowed to issue
(b) Shares currently held by all shareholders (issued minus treasury)
(c) Shares that have not yet been created
(d) Only the shares held by company founders

Q10. A sectoral index such as "Nifty Bank" tracks:

(a) All 50 stocks in the Nifty 50
(b) Stocks from a specific industry (banking)
(c) Government bonds
(d) Foreign currency rates

Section B — Matching (1 mark each) [8 marks]

Match each term in Column X with its correct description in Column Y. Write pairs (e.g., 11 → Z).

#	Column X
11	Authorized shares
12	Preferred shares
13	Bonus shares
14	Rights issue
15	Market value
16	Nifty 50
17	Free-float weighting
18	Thematic index

Code	Column Y
P	Free additional shares given to existing shareholders from reserves
Q	Maximum number of shares a company may legally issue
R	Offer of new shares to existing shareholders, usually at a discount
S	Price at which a share currently trades in the market
T	Shares with priority on dividends but usually no voting rights
U	Index of 50 large Indian companies on the NSE
V	Weighting based only on publicly tradable shares
W	Index built around a theme (e.g., ESG, consumption) rather than one sector

Section C — True / False WITH Justification (2 marks each) [12 marks]

State True or False (1 mark) and give a one-line justification (1 mark).

Q19. A stock split changes the total market capitalization of the company.

Q20. Preferred shareholders generally receive dividends before common shareholders.

Q21. The NASDAQ Composite includes only 500 companies, like the S&P 500.

Q22. In a free-float market-cap-weighted index, promoter-locked shares are excluded from the weighting.

Q23. A company can issue more shares than its authorized share capital allows.

Q24. Bonus shares increase the wealth of shareholders because they receive extra shares for free.

End of Paper

Answer keyMark scheme & solutions

Section A — MCQ (1 mark each)

Q1 → (b) A share is a unit of ownership; not a loan (that's a bond). (1)

Q2 → (b) Common/equity shareholders vote; preferred usually do not; bondholders/creditors never vote. (1)

Q3 → (b) Face/par value is the nominal book value, distinct from market price. (1)

Q4 → (b) Dividend yield $=\dfrac{\text{DPS}}{\text{Market Price}}\times100$ . (1)

Q5 → (b) 2-for-1 split doubles share count and halves price; value unchanged. (1)

Q6 → (b) Sensex = 30 companies (BSE). (1)

Q7 → (b) Dow is price-weighted (higher-priced stocks carry more weight). (1)

Q8 → (b) Buyback reduces outstanding shares. (1)

Q9 → (b) Outstanding = issued shares minus treasury (buyback) shares. (1)

Q10 → (b) Sectoral index tracks one industry. (1)

Section B — Matching (1 mark each)

Q	Answer
11	Q — Maximum shares legally issuable
12	T — Priority dividends, usually no vote
13	P — Free shares from reserves
14	R — New shares to existing holders at discount
15	S — Current trading price
16	U — 50 large NSE companies
17	V — Weighting on publicly tradable shares
18	W — Index built around a theme

(1 mark each, total 8)

Section C — True/False with Justification (2 marks each)

Q19. FALSE. (1) A split only changes share count and per-share price proportionally; total market cap = price × shares stays the same. (1)

Q20. TRUE. (1) "Preferred" means priority in dividend payment (and liquidation) ahead of common shareholders. (1)

Q21. FALSE. (1) The NASDAQ Composite includes thousands of stocks listed on NASDAQ; the S&P 500 has ~500. (1)

Q22. TRUE. (1) Free-float excludes locked-in/promoter/strategic holdings, counting only shares available for public trading. (1)

Q23. FALSE. (1) Issued shares cannot exceed authorized capital without first increasing the authorized limit. (1)

Q24. FALSE. (1) Bonus shares increase quantity but proportionally reduce price per share; total wealth is unchanged (only from reserves capitalization). (1)

Worked numeric illustrations (for verifying reasoning)

Dividend yield example (Q4 logic): If DPS = ₹5 and market price = ₹200, yield = $5/200 \times 100 = 2.5\%$ .
2-for-1 split (Q5/Q19 logic): 100 shares @ ₹400 → market value ₹40,000. After split: 200 shares @ ₹200 → ₹40,000. Unchanged.
Bonus 1:1 (Q24 logic): 100 shares @ ₹300 = ₹30,000. After bonus: 200 shares, adjusted price ₹150 = ₹30,000. Unchanged.

[
  {"claim":"Dividend yield of DPS=5, price=200 is 2.5%","code":"dps=5; price=200; yield=dps/price*100; result = (yield==2.5)"},
  {"claim":"2-for-1 split keeps market cap constant (100@400 -> 200@200)","code":"before=100*400; after=200*200; result = (before==after)"},
  {"claim":"1:1 bonus keeps total value constant (100@300 -> 200@150)","code":"before=100*300; after=200*150; result = (before==after)"},
  {"claim":"Sensex has 30 constituents (not 50)","code":"sensex=30; nifty=50; result = (sensex==30 and sensex!=nifty)"}
]