- Definition

Definition

Equities: The term 'equity' implies the net assets of a company and is often used to denote its ordinary shares. A 'share' is a part of the ownership of a company, and ordinary shareholders, as owners of the company, are entitled to its equity, i.e. the residue of its assets after all debts have been paid. In return, the ordinary shareholders provide the 'risk capital' of the company, i.e. if the company does well they receive good dividends and if it does badly they may get no dividends at all, because after the claims of loan stockholders and preference shareholders have been met there may be no profits left to distribute to ordinary shareholders: they do not share profits but are entitled to the residual profits.

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