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Disadvantages of Equity Shares

Disadvantages of Equity Shares:

1. Irredeemable: Equity shares cannot be redeemed during the lifetime of the business concern. It is the most dangerous thing of over capitalization.

2. Obstacles in management: Equity shareholder can put obstacles in management by manipulation and organizing themselves. Because, they have power to contrast any decision which are against the wealth of the shareholders.

Disadvantages of Equity Shares
[Post Image Courtesy of Stuart Miles at FreeDigitalPhotos.net]

3. Leads to speculation: Equity shares dealings in share market lead to secularism during prosperous periods.

4. Limited income to investor: The Investors who desire to invest in safe securities with a fixed income have no attraction for equity shares.

5. No trading on equity: When the company raises capital only with the help of equity, the company cannot take the advantage of trading on equity.

Sourced From: Financial Management By C. Paramasivan And T. Subramanian

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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