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Question
Justify the following statement.
Equity shareholders are real owners and controllers of company.
Solution
Justification:
- Equity shareholders participate in the general meetings and management of their company.
- They are allowed to vote on all matters discussed at the general meeting.
- They elect their representatives to manage the company.
- 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 own the company and bear ultimate risk associated with the ownership.
- If the company is successful, they enjoy great financial rewards while if the company fails, the risk falls mainly on them.
Hence, equity shareholders are real owners and controllers of company.
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