EQUITY SECURITY

Final Term Assignment

Sir Saeed Meo

Student Name Roll #

Muhammad Tayyab Mcow-F19-049
Iftikhar Ali Mcow-F19-010
Hassan Masroor Mcow-F19-028
Umair ishtiaq Mcow-F19-029
Muhammad Hamza Sajjad Mbpw-f18-008
 EQUITY SECURITY
• An equity security is a financial instrument that
represents an ownership share in a corporation. The
instrument also gives its holder the right to a
proportion of the earnings of the issuing
organization.
• Equity securities also give their holders varying levels
of voting rights in regard to certain matters, such as
the appointment of a board of directors that then
acts on behalf of the shareholders
 WHO CAN ISSUE EQUITY
SECURITIES?
•Only corporations issue equity securities.
They are not issued by non-profit entities,
partnerships, or sole proprietorships. It is
much easier for a large publicly-held
corporation to issue equity securities,
since they can readily sell the shares on a
stock exchange
 TYPES OF EQUITY SECURITIES
•There are two types of Equity securities

•Common shares
•Preference shares
 COMMON SHARES
•Common shares represent an ownership
interest in a company and give investors a
claim on its operating performance, the
opportunity to participate in the
corporate decision-making process, and
a claim on the company’s net assets in
the case of liquidation
 COMMON SHARES CAN BE

•Callable common shares

•Puttable common shares
DIFFERENCE B/W CALLABLE & PUTTABLE

•Callable common shares give the issuer the

right to buy back the shares from shareholders
at a price determined when the shares are
originally issued.
•Puttable common shares give shareholders
the right to sell the shares back to the issuer at
a price specified when the shares are originally
issued.
 PREFERENCE SHARES
•Preference shares are a form of equity in
which payments made to preference
shareholders take precedence over any
payments made to common stockholders
 PREFERENCE SHARE CAN BE
•Cumulative
•Non-cumulative
•Participating
•Non-participating preference shares
DIFFERENCE B/W CUMULATIVE & NON-CUMULATIVE
PREFERENCE SHARES
• Cumulative preference shares are preference shares
on which dividend payments are accrued so that
any payments omitted by the company must be
paid before another dividend can be paid to
common shareholders
• Non-cumulative preference shares have no such
provisions, implying that the dividend payments are
at the company’s discretion and are thus similar to
payments made to common shareholders.
DIFFERENCE B/W PARTICIPATING & NON PARTICIPATING
PREFERENCE SHARES
• Participating preference shares allow investors to
receive the standard preferred dividend plus the
opportunity to receive a share of corporate
profits above a pre-specified amount.
• Non-participating preference shares : The right to
receive only a fixed dividend. No share in the
additional profits of a company
 REFERENCE
• https://www.accountingtools.com/articles/2017/5/6/equity-security
• https://www.cfainstitute.org/en/membership/professional-
development/refresher-readings/overview-equity-securities
• https://ift.world/concept1/concept-73-types-equity-securities/
• https://efinancemanagement.com/sources-of-finance/equity-share-and-its-
types
• https://www.smartcapitalmind.com/what-are-equity-securities.htm
• https://tickertape.tdameritrade.com/investing/equity-securities-debt-
securities-16959