Long-term Sources — Part 1: Equity, Preference Shares and Special Issues: visual lesson, ISC Class 12 Commerce

Lesson

Long-term Sources of Funds for a Company

Part 1: equity shares, preference shares, and five special ways of issuing shares.

In this lesson you will

Explain the features, advantages and disadvantages of equity shares
Describe the types of preference shares and distinguish them from equity shares
Explain bonus shares, rights issue, ESOP, sweat equity and QIP, and distinguish bonus from rights

Part 1 at a glance

Diagram

Every long-term source is either owners' money or borrowed money.

Concept

Table of five features of equity shares with their meanings
Feature of equity shares	What it means
Ownership and voting	Holders own the company and elect its directors
Residual claim	Paid last, from what is left
Variable dividend	Depends on profit and the board
Permanent capital	Repaid only on winding up (or a buy-back)
Highest risk, highest possible reward	Gains most in good years, loses most in bad