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Question
Write short note on Equity shares.
Solution
Equity shares are firm ownership expressed differently. They comprise the company's owner's fund or capital. Equity shares are those that do not have any special or preferential privileges in the payment of yearly dividends or capital repayment.
Some key points highlighting the characteristics of equity shares are as follows:
- The company grants voter rights to holders. The holders help the business make decisions. As their return on investment, they receive dividends out of profits.
- The dividend rate is not set-forth. High dividend in case of big gains and none in case of loss.
- They still retain residual interests on corporate liquidation.
- They help to share firm residual earnings.
All things considered, Equity shares constitute a kind of long-term corporate ownership-based investment. Given their great risk profile as well, there is a well-known adage regarding equity owners: "They sink and swim with the company".
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