WHAT ARE THE ADVANTAGE OF ISSUING EQUITY SHARES TO RAISE LONG-TERM FINANCE ?
Equity Shares are commonly referred to as 'Owner's Funds'. By issuing equity shares, a company is benefitted in the following ways.
1. Lifetime retention- A company need not to repay the equity share capital amount as raised by issue of equity shares during its lifetime. This is because the equity shares are retained by the company for its entire lifetime.
2. No charge on company's assets- The equity shareholders have no right on the assets of the concerned company. So in this manner, they have no right to claim any amount (by selling-off company's assets) in case the company fails to make dividend payments.
3. No obligation- In case, the company incurs losses, then it is not required to pay dividend to its equity shareholders.