- Equity shares do not create any obligation to pay fixed rate of dividend.
- Equity Shares provide permanent source of capital since it need not be repaid till the company is in existence.
- Equity shares do not create any charge over the assets of the company
Equity shares are amongst the most important sources of capital and have certain advantages which are summarized as
Advantages from the Shareholders’ Point of View
- Equity shares are very liquid and can be easily sold in the capital market.
- In case of high profit, they get dividend at higher rate.
- Equity shareholders have the right to control the management of the company.
- The equity shareholders get benefit in two ways, yearly dividend and appreciation in the value of their investment.
Advantages from the Company’s Point of View:
- They are a permanent source of capital and as such; do not involve any repayment liability.
- They do not have any obligation regarding payment of dividend.
- Larger equity capital base increases the creditworthiness of the company among the creditors and investors.
