Equity Share
The ordinary ownership share of a company, carrying voting rights and a claim on profits only after every other claimant has been paid.
How it is identified
Payout rank: secured creditors, then unsecured creditors, then preference shares, then equity shares
Unit
qualitative
In depth
Equity shares are described as the residual claim because they collect whatever is left, which is what makes their upside unlimited and their downside total. Every other claimant has a fixed entitlement; equity gets the remainder, so a small change in what the company earns produces a large change in what equity is worth. This is also why the same share is called 'ordinary' in some markets and 'common stock' in the United States. Newcomers often assume that being an owner puts them first in line, when the queue runs precisely the other way.
Worked example
A company winds up and realises ₹100 crore. Creditors are owed ₹70 crore and preference shareholders ₹20 crore, so equity divides 100 - 70 - 20 = ₹10 crore. Had realisations been ₹85 crore, creditors take 70, preference takes the remaining 15 of its 20, and equity receives nothing at all.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Equity Share” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.