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# Introduction to Financial Market ## Permanent Capital The equity share capital represents permanent capital of the company. There is no obligation on the part of the company to repay the capital during the lifetime of the company. The equity shares are irredeemable. The shareholders may get their...

# Introduction to Financial Market ## Permanent Capital The equity share capital represents permanent capital of the company. There is no obligation on the part of the company to repay the capital during the lifetime of the company. The equity shares are irredeemable. The shareholders may get their funds back on the winding up of the company. ## Risk to Capital There is no guarantee of return of capital, in the case of winding up of the company. Equity shareholders have a residual claim (last claim) on the winding up of the company. There are chances, the equity shareholders may not get back their initial capital invested in the company. Therefore, the equity capital is called the risk capital. ## Fluctuating Dividend There is no guarantee of minimum dividend. The rate of dividend depends upon the earnings of the company. If the company makes good profit, then the equity shareholders will get good dividend. If the company makes low profits or loss, then the equity shareholders may not get any dividend. ## Voting Rights The equity shareholders enjoy normal voting rights. They can vote on all resolutions passed at the shareholders' meetings. They can exercise their rights either in person or by proxy. The preference shareholders do not have normal voting rights. ## Capital Appreciation Equity shares are subject to capital appreciation or depreciation. Share capital appreciation takes place when the market value of the shares increases on the stock exchange due to excellent performance of the company. However, Share capital depreciation may take place when the market value of the shares declines on the stock exchange due to poor performance of the company ## Benefit of Bonus Shares Issue of bonus shares is also called as Capitalisation of Reserves. Companies with good amount of free reserves issue bonus.