Share Capital and Types of Shares — SPCC STD 11 Commerce — Question

1. Introduction : A company needs finance at every stage. The amount of capital required depends upon the nature and size of the business. A company can raise long term funds by issue of shares. Equity shares are the most important source of raising long term capital.
2. Meaning of Equity Share : Equity share means which have right to receive dividend after preference shar and getting refund of share capital after preference share in case of dissolution of company.
3. Characteristics of Equity Share : The characteristics of equity shares are as follows:
(1) True Owners: Equity shareholders are known as true owners or faithful companion because they bear more risk than preference shareholders.
(2) Voting Rights : The equity shareholder have a right to vote in the meeting of the company.
(3) Dividend : Equity shareholder’s dividend and rate of dividend is uncertain even it is not mandatory to pay dividend on equity share.
(4) Link with Profit : The dividend on equity share is directly related with the profits of the company. The dividend varies with the increase or decrease of profit.
(5) General Meeting : The equity shareholders have a right remain present in the general meeting. They have power to exercise voting rights and right to select directors.
(6) Refund of Capital: Equity shares are nonrefundable until the existence of the company.
(7) Dissolution : At the time of dissolution, the equity shareholders are refunded after paying the preference share capital.
(8) Benefits and Returns: On this type of shares various benefits and returns like right shares, bonus shares and benefits of increase in price of the share in the market are received.
(9) Registration of Share: Such equity share is registeredd in a recognised share market. So these shares can be purchased and sold at the market price easily.
4. Conclusion : The investors that are ready to bear a rTsk.pcihave interest in the management of the company invest their money in the Equity Shares.