Questions about investing

[Project X]

I just want to know a fees things about a relationship with am investor

Ok let's say I start a company called EA and my first game is fifa .. say the game sells millions of copies and the investor gets his money back with profit etc. Where will the money for the next edition of fifa com from will the investor have to forkout again?

Also how much equity do investors usually take?

 

[wndrbees]

the amount of profit that gets paid out to investors is determined by the board of the company and then paid out as dividends on a specified date. the rest of the profit gets re-invested into the business as in this case to develop the new game.

the dividend amount is very much dependent on the type of business, i.e. when the business is growing dividends will be lower, whereas an established company with not much room for growth will payout more of its profit to investors. However, high returns on share price usually come from small companies which are rapidly expanding.

 

[Project X]

Ok does the board decide everytime before dividends are paid or will the be a standard?

 

[wndrbees]

It is decided every time they declare a dividend. Many established companies do however pay similar amounts of dividends e.g. 3-4% of share price annually. If the amount changes drastically there has to be a pretty good reason e.g. recession when Anglo paid out nothing but then their share price plummeted.

 

[mass09]

The investors could get the dividends and also potentially an increase in the share price since the original purchase. The dividend is expressed as cps (cents per share). You might get a interim dividend and a final dividend.

As a shareholder you can't invest in just one game or product but you invest in the company as a whole.

Also a investor doesn't just get his money back with profit, he might get a dividend if one is declared and then he has to sell his shares to get his money back, it could be higher or lower than the initial investment. Note that he doesn't have to sell, he could stay invested and earn dividends which he can spend or reinvest, the compounding effect is great over a period of time.

 

[ice_cubes]

I just want to know a fees things about a relationship with am investor

Ok let's say I start a company called EA and my first game is fifa .. say the game sells millions of copies and the investor gets his money back with profit etc. Where will the money for the next edition of fifa com from will the investor have to forkout again?

Also how much equity do investors usually take?

you have 2 types of investors
1. Those out to make a quick buck...like in your example
2. Those who have a vested interest in the business & wanna keep their investment in the business & earns dividends..like in the example that mass09 gave

question is, what investment are you looking at & why? u want to grow yo business or u want 2 make a quick buck?

 

[Project X]

Ok thanks guys now i understand a little bit more. This was just one of a few gaps in my mind i needed to fill.

This investor stuff can get very confusing.