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What are Equity Instruments?

What are Equity Instruments?

Equity is a type of financial instrument issued by a business. The instrument holder will have the status of being the owner of the business. It will consist of common stock and preferred stock.

1. Common stock

Common stock is an instrument that shows ownership of a business. Have the right to receive dividends from operating profits. Have the right to participate in deciding the operations of the business through voting in shareholder meetings in proportion to their shareholding. If the company ceases operations, ordinary shareholders will receive Return of capital after creditors and preferred shareholders

2. Preferred stock

Preferred stock is an instrument showing ownership of a business with the right to receive dividends. At the rate specified according to the conditions Generally, preferred stockholders do not have voting rights in shareholder meetings. But preferred shareholders will receive their capital return before common shareholders if the company goes out of business.

3. Shareholder Risk

Shareholder Risk is A business can not pay dividends if its operating results are at a loss. In addition, dividends paid to common stockholders are uncertain depending on the company’s operating results. This is different from debt holders. that receives a fixed interest payment