Question
Owned Capital and Borrowed Capital
| Points | Owned Capital | Borrowed Capital |
| 1. Meaning | It is that capital that is contributed by shareholders. | It is that capital that is borrowed from creditors. It is also known as debt capital. |
| 2. Sources | This capital is collected by the issue of equity shares and preference shares, ploughing back of profits (ownership securities). | It is collected by way of the issue of debentures, fixed deposits, loans from banks/financial institutions, etc. (loan, borrowings). |
| 3. Return on Investment | The shareholders get dividends as income on their investment. The rate of dividend is fluctuating, in the case of equity shares but is fixed in the case of preference shares. | The debt capital holders get interested as income on their investment. Interest is paid at a fixed rate. |
| 4. Status | The shareholders are owners of the company. | The debt holders are creditors of the company. |
| 5. Voting right | The equity shareholders enjoy normal voting right at the general meetings. | The creditors do not enjoy voting rights at the general meeting. |
| 6. Repayment of Capital Redemption | The shareholders do not enjoy priority over creditors. They are eligible for repayment of Capital only after making payment to creditors at the time of windings up of the company. | The creditors get priority over the shareholders in case of return of principal amount at the time of winding up of the company. |
| 7. Charge on assets | The shareholders do not have any charge on the assets of the company. | The secured debenture holders have a change on the assets of the company. |
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