If only equity shares are issued, the company cannot take the advantage of trading on equity. the investors or the money which a company actually invests in the They may earn dividend at a higher rate and have the risk of getting nothing. So, V. Other Advantages: It appeals most to the speculators. Right to Participate in the Control and Management: Equity shareholders have voting rights and elect competent persons as directors to control and manage the affairs of the company. Privacy Policy3. In case of winding up of the available and the intention of the board. 3. V. High cost: It costs more to finance with equity shares than with other securities as the selling costs and underwriting commission are paid at a higher rate on the issue of these shares. They may get a higher rate of dividend or they may not get anything. it from time to time after completing some formalities of paying fees
The biggest advantage of having equity shares is that you can easily transfer these shares to someone else. II. Disclaimer Copyright.

They undertake risk in both ways regarding dividend and return of capital as well. A company is not required to pay-back the equity capital during its life-time and so, it is a permanent sources of capital. If you have any An equity share, normally known as ordinary share is a part ownership where each member is a fractional owner and initiates the maximum entrepreneurial liability related to a trading concern. In the world of online share trading, equity comes with different aspects, thus, it is important to understand the disadvantages as well as advantages of equity shares before starting or joining a new business or startup. paid up, rights, bonus, sweat equity etc. comment or suggestion regarding the article, feel free to write in Advantages to Investors: Investors or equity shareholders may enjoy the following advantages: I. A company is not required to pay-back the equity capital during its life-time and so, it is a permanent sources of capital. The potential for generating profits in equity shares is greater than any other investment avenue.

IV. Over-capitalization: Excessive issue of equity shares may result in over-capitalization. Advantages of Equity Shares From the Shareholder’s Point of View: • Equity shares are liquid in nature and can be sold easily in the capital market. Uncertain and Irregular Income: The dividend on equity shares is subject to availability of profits and intention of the Board of Directors and hence the income is quite irregular and uncertain. There is no fixed rate of dividend for equity shareholders, rather it depends upon the availability of surplus funds. Your email address will not be published. They may not get the dividend even when company has profits. 3. bonus means without any additional cost, based upon the number of Equity share capital is irredeemable in nature and it remains permanently with the company. To answer their doubts, we will list down the advantages of equity shares in this article. Credit worthiness: Issuance of equity share capital creates no change on the assets of the company. capital becomes one and the same. Equity shareholders have a right to vote on every resolution placed in the meeting and the voting rights shall be in proportion to the paid-up capital. Advantages of Equity Capital. 2. Due to low rate of dividend and certain other factors the market value of equity shares goes down resulting in a capital loss to the investors. The shares are traded on the stock exchange and you can easily find buyers or sellers in the market. Certain groups of equity shareholders may manipulate control and management of company by controlling the majority holdings which may be detrimental to the interest of the company. Before publishing your articles on this site, please read the following pages: 1. It

Advantages of Equity Shares From the Shareholder’s Point of View: • Equity shares are liquid in nature and can be sold easily in the capital market. More Income: Equity shareholders are the residual claimant of the profits after meeting all the fixed commitments. share capital is the maximum number of stock units (shares) that a While transferring the shares, the transferee must ensure that the issuing corporation transfers the ownership in its books so that the corporate benefits like dividends, bonus shares, right shares, etc.

III. The above are some of the advantages of equity shares in the stock market. Equity Shares Features.

Benefits of equity share investment are dividend entitlement, capital gains, limited liability, control, claim over income and assets, right shares, bonus shares, liquidity etc. Dividend income is one of the major attractions of investing in equity shares. It

Content Filtrations 6. Disadvantages to company: Equity shares have the following disadvantages to the company: I. Dilution in control: Each sale of equity shares dilutes the voting power of the existing equity shareholders and extends the voting or controlling power to the new shareholders. They enjoy voting right on all matters relating to the business of the company. Irredeemable: Equity shares cannot be redeemed during the lifespan of the business concern. All the content on our website is free of cost. Dividend per share is low in that condition which adversely affects the psychology of the investors. or they can be accumulated earnings which are not offered in the form Raising money for your business through equity finance can have many benefits, including: general, all companies accept the complete payment of shares in a But, when interest rates are high, shares tend to be less attractive, and prices tend to be depressed.

III. Therefore, any liability arising on the company will not be a liability to you beyond your investment amount. To understand equity share capital, individuals need to familiarise themselves with the meaning of equity shares.

Current dividend yield may be low but potential of capital gain is great. its articles of incorporation. The major advantage of investment in equity shares is its ability to increase in value by sharing in the growth of company profits over the long run. However, the beginners entering the market often think that if there is any benefit of putting their hard earned money in the equities. Investors in such shares hold the right to vote, share profits and claim assets of a company. an appreciation in the net worth of the company’s assets will increase the market value of equity shares. The above are some of the advantages of equity shares in the stock market. Trading on equity not possible: If equity shares alone are issued, the company cannot trade on equity. Loss on Liquidation: In case, the company goes into liquidation, equity shareholders are the worst suffers. A company can trade on equity in bad periods on the risk of equity capital. We provide free articles and blogs on our website to improve financial literacy relating to the stock market. In case of winding up of the company, equity capital can be paid back only after every other claim including the claim of preference shareholders has been settled. The equity capital act as a cushion for the lenders, as with more and more equity base, the company can easily raise additional funds on favorable terms. Equity shareholders get dividend after it is paid to the preference shareholders. Capital profits: The market value of equity shares fluctuates directly with the profits of the company and their real value based on the net worth of the assets of the company. accrue to the new owner. Shares sold by a company function as a source of investment for the company as well. For an investor, these shares are an attestation of their ownership in the company which entitle them to get a share from the net profits and a residual claim over the assets of the company in the event of a liquidation. So when you buy shares of a company, you are doing an equity investment in that company. While transferring the shares, the transferee must ensure that the issuing corporation transfers the ownership in its books so that the corporate benefits like dividends, bonus shares, right shares, etc. Plagiarism Prevention 4. The buyer should ensure that the issuing corporation transfers the ownership on its books so that dividends, voting rights, and other privileges will accrue to the new owner. The equity shares are liquid in nature. They can be in the form of dividend Thus they provide a cushion of safety against unfavorable development. this is everything you need to know about equity shares in order to Equity shares can be issued without creating any charge over the assets of the company. A company can raise further finance on the security of its fixed assets. Their prices fluctuate frequently which are not in the interest of the company. shareholders in exchange for the shares purchased by them. Equity shareholders deal with greater risk than the preference shareholders because equity capital is paid after paying all the claims to the preference shareholders and to others. II.

IV. investor accepts and agrees upon). shares are classified on the basis of different factors. TOS 7. These shares are issued to the general public and are non-redeemable in nature. The biggest advantage of having equity shares is that you can easily transfer these shares to someone else.

Potential conflict. The total yield or yields to … Business management and the board of directors determine a company's capital structure, which usually consists of both debt and equity … Meaning, Definition and Classification of Preference Shares. Also known as ordinary shares, it symbolises partial ownership of a shareholder in which he takes the maximum entrepreneurial risk related to business venture on its shoulder. This characteristic creates inflexibility in capital structure of the company. Anyone can invest in the equity market if they have even the basic idea of how the stock market functions. Here you can publish your research papers, essays, letters, stories, poetries, biographies and allied information with a single vision to liberate knowledge. Required fields are marked *, B-9, 2nd & 3rd Floor, Behind WTP South Block, Mahalaxmi Nagar, Malviya Nagar, JAIPUR, RAJASTHAN, 302017. If a company generates enough earnings, shareholders will be entitled to get dividend but there is no legal obligation to pay dividends. company can issue as mentioned in its memorandum of association or

the importance of issuing ordinary shares is that no organisation for profit can exist without equity share capital.