Equity and Equity Shares

13 07 2011

Equity is the capital that is used to start a company. It has all the risk and gives a share in the profit that the corporation makes. Equity shares are grant ownership on equity and thus the underlying company. Shareholders are owners of a company. Their ownership is proportional to the percentage of shares held in the company. Shareholders appoint the company’s board and chief executive officers (CEOs). The profit that the company makes is distributed amongst the shareholders as a dividend. When the company incurs a loss, no dividend is paid.

When the fortunes of a company improves because of improved business conditions or an increase in the demands of a company’s products, the value of shares representing the company also rises, resulting in profits for shareholders. However, during times of losses, the share prices can decline.

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