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Question
Justify the following statement.
Equity shareholders are real owners and controllers of the company.
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Solution
- Equity shareholders participate in the general meetings and management of their company.
- They are allowed to vote on all matters discussed at the general meeting.
- They elect their representatives to manage the company.
- Equity Shares do not enjoy preference for dividend and do not have priority for payment of capital at the time of winding up of company.
- Equity shareholders own the company and bear the ultimate risk associated with the ownership.
- If the company is successful, they enjoy great financial rewards, while if the company fails, the risk falls mainly on them.
Hence, equity shareholders are real owners and controllers of the company.
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