Question

Whaqte are equity shares and features of equity

Answer 1

Equity shares:

Equity Shares, also known as ordinary shares, which indicates other than preference shares. The holders of these shares are termed to be the real owners of the company and owns a voting right in the meetings of holders of the company. They are paid dividend after paying it to the preference shareholders; and holds a control over the working of the company.

Features:

1. Maturity of the shares: Equity shares are permanent in nature, which has no maturity period.

2. Residual claim on income: Equity shareholders do not receive the fixed rate of dividend; and gets income left after the payment of fixed rate of dividend to preference shareholder

3. Residual claims on assets: Equity shareholders holds the right to get the claims on assets.

4. Right to control: Equity shareholders are the actual owners of the company and holds the power to control the company's management. They also bear the highest risk.

5. Voting rights: Equity shareholders holds the voting rights in the company meeting of and thus can change or remove any decision of the business concern.

6. Pre-emptive right: The pre-emptive right is given to the shareholders.

7. Limited liability: The liability of equity shareholders liability to the value of shares which means it is limited to the extent of their investment.

8. Transferable: These are transferable, which means that equity shares owners can be transferred with or without consideration to other person