Advantages and Disadvantages of Ordinary Shares

The Advantages of Ordinary Shares (also known as equity shares or common stocks) are:

1) Ordinary shareholders can vote at company's annual general meeting and have the ability to elect the board of directors. Each share carries the right to one vote at the meetings.

2) The ordinary shareholders are the owners of the business and they can receive dividends from the company out of its profit. The dividends payable are often expressed in terms of cents per share.

The Disadvantages of Ordinary Shares are as follows:

1) Ordinary shares are one of the riskiest types of investments because there can be no dividend payable during or at the end of the year.

2) The shareholders will bear the operational risks of the organization.

3) Another disadvantage is that the issue of new shares may result in diluting the shares held by the existing shareholders.

* Next: What are Ordinary Shares?

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