FUNDAMENTALS OF EQUITY SHARES

This section focuses on the types, features and evaluation of equity/ordinary shares

Types

Authorized equity/share capital represents the maximum amount which a company can raise from the ordinary share holders and can be changed in the prescribed manner. The portion of the authorized capital offered by the company to the investors is the Issued capital. Subscriber share capital is that p’an of the issued capital which has been accepted/subscribed by the investors. The, amount paid by the shareholders is the paid-lip capital. The issued, subscribed and paid-up capitals are generally the same.

Ordinary shares have typically a par/face value in terms of the price for each share, the most popular denomination being Rs 10. The price at which the equity shares are issued is the Issue price. The issue price for new companies is generally equal to the face value. It may be higher for existing companies, the difference/excess being share premium. The book value of ordinary shares refers to the paid-up capital plus reserves and surplus (net worth) divided by the number of outstanding shares. The price at which equity shares are traded in the stock market is their market value. However, the market value of unlisted/thinly traded  shares is not available.

Features

The ordinary shares have some special features in terms of the rights and claims of their holders.

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