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Question
Justify the following statement.
Equity share capital is risk capital.
Solution
Justification:
- Equity shareholders own the company and bear ultimate risk associated with the ownership.
- The equity shares do not enjoy preference for dividend. Also, they do not have priority for repayment of capital at the time of winding up of the company.
- Equity shareholders do not carry any fixed commitment of dividend. They are paid dividend at the rate recommended by Board of Directors.
- If there is no profit, no dividend will be payable. Similarly, if there is less profit, lesser dividend will be paid.
- The fortune of equity shareholders is tied up with the ups and downs of the company.
- They are described as ‘shock absorbers’ when company has financial crisis.
Hence, equity share capital is risk capital.
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Answer in one sentence.
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Correct the underlined word and rewrite the following sentence.
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Correct the underlined word and rewrite the following sentence.
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Study the following case/situation and express your opinion.
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Answer the following question.
What are preference shares? State it’s features
Give one word or phrase for the following sentence:
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Preference Shareholders get priority in dividends over equity shareholders.
