10. Who of the following do not
enjoy voting rights though they
have the status of owners?
O Equity shareholders
O Pref. shareholders
O Debenture holders
O All of them
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Business Studies > Sources of Business Finance > Equity Shares and Preference Shares
Sources of Business Finance
Equity Shares and Preference Shares
You’ve heard the term ‘shares‘ certainly. You might have the basic idea of what a share is as the definition is in the word itself. But did you know that every shareholder is actually a part owner of the company? Let’s understand the basics about equity shares and preference shares.
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Equity Shares
Equity shares are also known as ordinary shares. They are the form of fractional or part ownership in which the shareholder, as a fractional owner, takes the maximum business risk. The holders of Equity shares are members of the company and have voting rights. Equity shares are the vital source for raising long-term capital.
Equity shares represent the ownership of a company and capital raised by the issue of such shares is known as ownership capital or owner’s funds. They are the foundation for the creation of a company.
Equity shareholders are paid on the basis of earnings of the company and do not get a fixed dividend. They are referred to as ‘residual owners’. They receive what is left after all other claims on the company’s income and assets have been settled. Through their right to vote, these shareholders have a right to participate in the management of the company.
Now let’s understand what motivates the company to raise them: