Question

Equity shareholders are residual owner's why?

Answer 1

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.

Answer 2

Answer:  Equity shareholders never get any fixed dividend, but still are paid when tax to the government is paid, rate of interest on loans are paid, debentures and preference shares dividend have been paid. That is why they are referred to as ' residual owners "

Explanation:

1. They are given what is left out after all other claims on the profits, income, and assets that have been settled.

2. Equity shareholders represent the ownership of an entity and thus the capital raised from it by the issue of such shares is called ownership capital gains.

3. Henceforth, equity shareholders are not entitled to dividends at any fixed rate.