Equity Share represents a unit of ownership in a company and forms the foundation of a firmís capital structure. Holders of equity shares, also known as ordinary shareholders, are partial owners of the company and have the right to vote on important corporate matters, such as electing the board of directors or approving major decisions. Equity shares also entitle investors to a portion of the companyís profits, typically distributed as dividends.

Key Features of Equity Shares:

• Ownership Rights: Each equity share gives the holder a proportional ownership stake in the company and voting power based on the number of shares owned.
• Dividend Entitlement: Dividends are not fixed and depend on the companyís profitability and managementís discretion.
• Residual Claim: In the event of liquidation, equity shareholders are paid after all debts and preference shareholders are settled.
• Market Liquidity: Listed equity shares can be easily traded on stock exchanges like the NSE and BSE.

Types of Equity Shares:

• Ordinary Shares: The most common type, granting voting rights and variable dividends.
• Bonus Shares: Issued to existing shareholders from accumulated profits, increasing the total number of shares held.
• Rights Shares: Offered to existing shareholders at a discounted price to raise additional capital.

Example:
If a company has issued 10 lakh equity shares and an investor owns 10,000 shares, the investor holds a 1% ownership stake in the company. If the company declares a ?5 per share dividend, the investor receives ?50,000 as dividend income.

Importance of Equity Shares:
Equity shares are vital for companies as they provide long-term funding without creating debt obligations. For investors, they offer the potential for capital appreciation and dividend income, making them a key component of wealth creation over time.

In conclusion, equity shares symbolize ownership and participation in a companyís growth. While they carry higher risk compared to debt instruments, they also offer greater potential returns, making them an essential part of diversified investment portfolios.