Question

Write any four features of equity shares.

Answer 1

The features of equity shares are as follow :

Primary Risk Bearers: Equity- shareholders are the primary risk bearers of the company. In case the company suffers losses then equity- shareholders have to bear the loss. The due payment is given to creditors before paying the equity shareholders.

Claim over Residual Income: The equity shareholders have claim over the leftover income of the company only. They get the share in the income left after satisfying the claims of all creditors, outsiders and preference shareholders.

The basis for Loans: Equity share capital is the basis on which loans can be raised. The amount of equity share capital adds to the credibility- of the company. The amount of equity share capital increases the confidence of the creditors.

Control: Equity shareholders have control over the activities of the company-. The equity shareholders have voting rights. The equity shareholders cast vote to select the Board of Directors who control and manage the affairs of the company.