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Question : Case Study: XYZ Ltd. - Raising Finance for Expansion

XYZ Ltd. is a growing company that manufactures electronic gadgets. The company has been successful in the market and is planning to expand its operations. To finance this expansion, XYZ Ltd. is considering various sources of business finance.

Questions : Equity Shares and Preference Shares

What is the main characteristic of equity shares?

 

Option 1: Fixed dividend payments
 

Option 2: No voting rights
 

Option 3: Ownership in the company

 

Option 4: Guaranteed redemption


Team Careers360 5th Jan, 2024
Answer (1)
Team Careers360 16th Jan, 2024

Correct Answer: Ownership in the company


Solution : The correct answer is (c) Ownership in the company

Equity shares represent ownership or equity ownership in a company. Shareholders who hold equity shares have ownership rights in the company, which typically includes voting rights, the right to share in the company's profits (through dividends), and the right to participate in decision-making processes related to the company's operations and policies. Unlike debt securities (e.g., debentures), equity shares do not guarantee fixed dividend payments or redemption; instead, the dividend payments to equity shareholders are variable and based on the company's profitability and the decisions of the board of directors.

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