Question : Case Study: ABC Corporation - Financing Growth Strategies
ABC Corporation, a leading manufacturing company, is looking to finance its growth strategies. The company is exploring various sources of business finance to achieve its expansion goals.
Questions : Different Sources of Finance
What is the primary characteristic of equity shares?
Option 1: Fixed dividend payments
Option 2: Ownership in the company
Option 3: Guaranteed redemption
Option 4: No voting rights
Correct Answer:
Ownership in the company
Solution : The correct answer is (b) Ownership in the company
Equity shares represent ownership in a company, conferring the shareholder with ownership rights and an ownership stake in the company. Equity shareholders have a claim on the company's assets and earnings and typically have voting rights, allowing them to participate in key decisions and the governance of the company. Unlike debt instruments such as debentures, equity shares do not entail fixed dividend payments or guaranteed redemption. Instead, dividends to equity shareholders are subject to profitability and the decisions of the company's board of directors.
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