Equity

A Move Towards Ownership !

An Investment That Can Take You To Great Heights

 




    What Is an Equity?

    Equity is the amount of money invested or owned by a company’s owner. The equity of a company can be calculated by subtracting its liabilities from the assets on its balance sheet. An equity value is based on the current share price or a value set by professionals or investors. Owners’ equity and stockholders’ equity are other names for this balance.

    Who issues Equity?

    Long-term funds can be raised from lenders, banks, institutions, etc. These loans carry recurring interest charges. Another way to raise long-term capital is through public issue. Public issue means raising funds from the public.

    Features of Equity

    Following are the key features of equity shares:

    Permanent Shares:

    Equity shares are permanent assets of a company. And are returned only when the company winds up.

    Voting Rights:

    The majority of stockholders can vote. This allows them to select the company's leaders. Effective managers boost a company's annual revenue. The result is higher average dividend income.

    Liquidity:

    The majority of stockholders can vote. This allows them to select the company's leaders. Effective managers boost a company's annual revenue. The result is higher average dividend income.

    Limited Liability:

    Regular shareholders don't suffer losses. They aren't responsible for the company's debts. Stock prices drop, which affects shareholder ROI.

    Dividends:

    Equity shareholders share company profits. A company may distribute dividends from annual profits. If a company doesn't make enough money, it can choose not to pay dividends.

    Additional Profits:

    Equity holders are entitled to a share of the company's additional earnings.

    How Does Equity Work?

    Equity represents an investor's share of a company's value. Owning stock can lead to capital gains and dividends. Owning stock gives shareholders the right to vote on corporate actions and board elections. These equity ownership benefits boost shareholders' company interest. Equity can be positive or negative. If positive, the company has enough assets to cover its liabilities. When negative, a company's liabilities exceed its assets; this is balance sheet insolvency. Negative shareholder equity is considered a risky investment. Shareholder equity alone is not a definitive indicator of a company's financial health; using other tools and metrics, an investor can accurately analyze a company's financial performance.

    There are two forms of public issue:

    Initial Public Offer (IPO)

    Initial public offerings (IPOs) are public issues made by companies for the first time (IPO).

    Further public offer (FPO)

    A further public or follow-on offer (FPO) is a second public issue made by a company to raise capital.

    Comparison of Equity with other products

    Differences EQUITY FIXED INCOME
    Status Equity owners have shared companies, allowing them to claim profits. Bond holders are creditors who can only claim the loan amount.
    Issuers Corporates mainly issue equity. Firms issue government, financial, or corporate bonds or corporate deposits.
    Risk It is highly risky as it depends on its performance and the market conditions. Low risk is promised a fixed interest irrespective of the firm's performance.
    Claim to assets In case of bankruptcy; they have the last claim to assets. In the case of default debt holders are prioritized over stockholders.
    Returns High returns to compensate for high risk in the form of cost appreciation. Low but guaranteed interest returns.
    Dividends Dividends are cash flow of equity but paid at the discretion of management. No dividends are paid.
    Involvement Since stock owners are the firm's owners; they have voting rights. Bond holders have no say in the company matters and voting.

    Benefits of Equity

    Investors can reap many benefits from this investment vehicle Some of the benefits of Equity include the following: –

    Higher Returns

    Investing in stocks can generate high returns quickly compared to bank FDs. With good stock picks and a solid trading strategy, the stock market can provide incredible returns.

    Protection by SEBI

    The SEBI regulates India's stock market (SEBI). The regulatory framework created by SEBI protects all investors' rights. SEBI has helped reduce fraudulent activities by companies or individuals.

    Flexibility

    A new investor can start with a small investment. Buying small- or mid-cap stocks in smaller units is wise. You can buy, sell, or hold shares whenever you want with equity investing.

    Tax advantage

    Equity investments are tax-deductible. LTCG from equity investments up to Rs. 1 lakh are tax-free. Above 1 lakh, LTCG is taxed at 10%. STCG from stocks are taxed at 15%. The return on debt or gold is taxed more than equities.

    Right shares and bonus shares

    'Rights shares' are used to raise capital. A right issue gives existing shareholders ownership and investment priority. Right shares are priced below market. Companies sometimes issue bonus shares. Existing shareholders get bonus shares free.

    Why should you invest in Equity?

    How to invest in Equity?

    It is quite easy to invest in EQUITY through Swaraj Finpro.Register online on our website- https://swarajfinpro.com/

    For more information call or whatsapp – 9630054050 , 9993025625

    FAQ

    In the primary market, securities are offered for public subscription to raise funds. Investors trade pre-issued securities on the secondary market. Secondary market is auction or dealer. OTC is a dealer market, while the stock exchange is an auction market.

    Foreign Portfolio Investors (FPIs) registered under SEBI (FPI) Regulations and NRIs/OCIs can invest on Indian stock exchanges, subject to the individual and aggregate limits in schedules 2 and 3 of FEMA 20(R).

    Earnings per share (EPS) is the company’s post-tax profits divided by the total number of shares in circulation.

    BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) are among India’s largest stock exchanges. BSE/NSE allow investors to buy and sell listed company shares.

    Private Limited Company
    Private limited company is owned privately by a family. They can’t sell shares to the public and only have one director. A private limited company cannot trade its shares on the stock market.

    Public Limited Company
    Public limited company is owned by a large number of investors. Shares of public limited companies are actively traded on the stock market. By selling securities, public companies can easily raise capital.

    Share This