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WHAT ARE THE MERITS OF EQUITY SHARES ?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 asked

WHAT ARE THE MERITS OF EQUITY SHARES ?

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Long-tern and Permanent Capital: It is a good source of long-term finance. A company is not required to pay-back the equity capital during its life-time and so, it is a permanent sources of capital. II. No Fixed Burden: Unlike preference shares, equity shares suppose no fixed burden on the company’s resources, because the dividend on these shares are subject to availability of profits and the intention of the board of directors. They may not get the dividend even when company has profits. Thus they provide a cushion of safety against unfavorable development

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

> MERITS OF EQUITY SHARES **I. Long-tern and Permanent Capital**: It is a good source of long-term finance. A company is not required to pay-back the equity capital during its life-time and so, it is a permanent sources of capital. **II. No Fixed Burden:** Unlike preference shares, equity shares suppose no fixed burden on the company’s resources, because the dividend on these shares are subject to availability of profits and the intention of the board of directors. They may not get the dividend even when company has profits. Thus they provide a cushion of safety against unfavorable development **III. Credit worthiness:** Issuance of equity share capital creates no change on the assets of the company. A company can raise further finance on the security of its fixed assets. **IV. Risk Capital:** Equity capital is said to be the risk capital. A company can trade on equity in bad periods on the risk of equity capital. **V. Dividend Policy:** A company may follow an elastic and rational dividend policy and may create huge reserves for its developmental programmes.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

**MERITS OF EQUITY SHARES** Hi, Merits to the company The company is able to serve fixed capital without any specific charge on the assets of the company. No need to return this capital as equity share capital is the permanent resource base of the company. No liability on the company to pay fixed dividend Generally equity shares are of lesser nominal value to attract large number of investors of all income group. Merits to the investors They get bumper earnings as equity shareholders get dividend after the payment of preferential shareholders by a specified rate of dividend and the balance is given to equity holders. Equity shareholders have a privilege to vote on the agenda in AGM. Right shares are issued to equity shareholders only They have the right to inspect books of accounts . Thanks

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