Equity shares were popularly known as ordinary shares. One who is the shareholder of the company is the real owner of the company. They have the complete authority of the company, its work and voting by the holders in the meeting of the company. They are the permanent members holding the authority of the company by every means. Equity shares were earlier recognized as ordinary shares. The shareholders are paid dividends after paying them to the owner. The rate of the dividend completely depends upon the profit of the company. The risk to the shareholder is more than the preference shareholders.
Features of the equity shares are attractive as it is profitable too for both the shareholders and the preference shareholders.
Features of equity shares
The capital of the equity shares is permanent and it can only be returned when there is a financial problem in the company or the company is not able to make up. The shareholders of equity have the right to choose the management of the company. The availability of the surplus fund will decide the rate of dividend. These are the features that one can look before having the benefits of equity shares.
Advantages of equity shares
No claim is made by the equity shares to fix the rate of dividends. Without making any charge on the assets of the company, equity shares can be issued. Equity shares are a permanent source of capital, and the company is liable to repay it. The company will fail to repay if there is a problem with liquidation. If any profit happens to the company, then the direct relief can be taken by the shareholders. Appreciations in the value of shares would be also given.
Disadvantages of equity shares
No advantages of trading can be taken by the company if the equity shares have been issued. The threat of overcapitalization is there because the equity capital cannot be redeemed. Problems and obstacles can be put by shareholders for management by making their organization. When a company is earning a lot, then the higher dividends have to be paid.
Equity shares allow the shareholders as well as the company owners to enjoy a lot of benefits that equity shares have. With the mutual collaboration of the company owners and shareholders, a lot of income can be earned in a very less period.