What are Equity Shares?

Equity Shares have no special privilege attached. Equity Shares are the shares that have no preferential right on payment of dividends and repayment of the capital in case of winding up. Equity Shares have no fixed rate of dividend. The rate of Dividend of equity shares depends upon the earned profit of the company of the accounting year. Equity Shares are called risk capital because these shares are more speculative. Equity Shares are the most ‘ risk and rewards’ shares of the company. The risk involved is losing part or all the value of shares if the business incurs losses. Rewards of equity shares involve payment of higher dividends and appreciation in the market value.

Equity Shares are the permanent capital of the company with no mortgage of assets of the company, as it is not redeemable shares. The risk of Equity Shares is diffused with the option of issuing further shares for raising capital. Equity Shares are profitable during inflation, and also Equity Shareholders have the chance to get bonus shares when the company earns huge profits. Equity Shares enjoy the perks of receiving higher dividends and appreciation of the value of assets.

Life-blood of any business is finance. Sufficient finance for the company helps to grow and expand the company. The financial needs of any business are concerned with the acquisition and utilisation of funds. It is done through planning, acquiring, utilising, managing, and controlling funds in connection with the business. Issuing shares is one of the most prominent ways to arrange funds for the business. The capital of a company is divided into large units with definite face value called shares.

Share is always a fixed denomination with a distinct number and has a face value. A company with share capital can issue shares at its very inception for raising capital and cannot be issued or transferred in fractions. Shares can be offered directly for public subscriptions. It can be fully or partially paid up.

A public limited company can issue only two types of shares:

A. Equity Shares

B. Preference Shares