NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
Which of the following is a feature of an equity share that distinguishes it from a debenture?
Equity shareholders are owners of the company with a residual claim on profits and assets, meaning they are paid only after creditors and preference shareholders. Debenture holders, by contrast, are creditors who receive fixed interest and have priority during liquidation.
- AHolders are owners with residual claim on the company's profits and assetsCorrect
- BHolders receive a fixed rate of interest before any dividend
- CHolders are creditors of the company
- DHolders have a priority claim on assets during liquidation
Explanation
Equity shareholders are the owners of the company and have a residual claim on profits and assets after all creditors and preference shareholders are paid. Fixed interest, creditor status and priority in liquidation are features of debentures or debt instruments.
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