What is Equity Share ?
Equity shares are the long term financial sources for any company. Each equity share represents a unit of part ownership in the company. Equity shares are also referred to as the common stocks or common shares. These shares are issued to the general public and investors and are non redeemable in nature. If a company does not earn any profit in a particular year then equity shareholders will not get any dividend. Thus, equity share are also known as Risk Capital. Investors in equity shares hold the voting rights and share profits and can also claim assets of a company.
Types of Equity shares –
Ordinary shares – This shares are issued by a company to produce funds so that they can figure solve the long term expenses caused by a business. An individual possessing a large number of ordinary shares to have substantial voting rights.
Preference equity shares – Preference equity shares are mainly issued to an investor by the owner of any company. In this share the dividends are paid out earlier then the common stock holders dividend are issued.
Bonus shares – This types of equity shares are issued by the retained earnings of a business and distributed among the investors as an additional stake in a company. Bonus shares are issued when a company is unable to pay dividend to its shareholders due to shortage of funds. This shares are given to the current shareholders on the basis of their existing holding in the company.
Government Bonds & Debentures
Government Bonds – A government bond is a debt instrument issued by the Central and State Governments of a country. The borrower uses this money to fund its operations, and the investors are entitled to receive interest on their investment. Bonds get secured by the collateral or physical assets of the issuing company. Bonds are long term investments and their tenure is generally higher than debentures. Bonds fall under the fixed-income class. In India there are different types of bonds are issued by the government. These are – Fixed Rate Bonds, Floating Rate Bonds, Sovereign Gold Bonds, Zero Coupon Bonds, Inflation Index Bonds, etc.
Debenture – Debentures are also debt financial instruments like bonds. It is an unsecured debt instrument that isn’t secured by collateral. Both Government and private companies use debentures to raise capital for business expansion, upcoming projects, or for raising short-term capital. Since debentures have no collateral backing, they must rely on the creditworthiness and reputation of the issuer for support. There are four different types of debentures, these are – Secured Debenture, Unsecured Debenture, Redeemable Debenture, Irredeemable Debenture.