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Sources of Corporate Finance — Secretarial Practice STD 12 Commerce / Arts — Question

Maharashtra BoardEnglish MediumSTD 12 Commerce / ArtsSecretarial PracticeSources of Corporate Finance4 Marks
Question
Equity Capital is risk capital.
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Answer

  • Equity shareholders have a claim over residual proceeds of the company.
  • In the event of winding up, they are the last to be paid off after setting the claims of creditors and external liabilities.
  • They have fluctuating returns and risk of fluctuating market value.
  • Equity capital is permanent capital and not refunded during the lifetime of the company.
  • Not having any assurance as regards dividend, repayment of capital Equity Capital becomes risk capital.
  • Thus, it is rightly said, that equity capital is risk capital.

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