Question

Why is equity share capital risky capital

Answer 1

This is bcoz, Equity share holders have a claim over the residual proceeds of a company...

Answer 2

Equity Share Capital is called as risk capital as equity shareholders have a claim over the residual proceeds of the company. In other words, in the event of winding up they are the last to be paid off after settling the claims of creditors and other external liabilities. In case the funds are insufficient to repay or settle external liabilities, equity shareholders are not paid off any thing instead the uncalled amount may be called up from the them.