Question

Why is equity share capital called risk capital?

Answer 1

Equity share capital is called risk capital because equity shareholders are the last to receive returns in a company, that return is only possible if the business is making a profit.

This makes it risky capital as the returns depend on the profits of the company.

Also read:

• Money Market Vs Capital Market
• SEBI Objectives and Functions
• What Are Equity Shares
• Preference Shares