Equity capital
Funds brought in by promoters and owners of the business, and by outside investors to whom the business offers equity shares.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Convertible debenturesDebentures that turn into equity shares on terms fixed at issue — the investor draws a coupon until conversion, and the company settles the debt in shares instead of cash.
- Coupon rateThe rate of interest a bond pays, applied to its face value and never to its market price — which is why the coupon tells you the cash flow but not the return.
- Credit riskThe risk that a borrower fails to meet its obligations on a debt instrument — the risk credit rating agencies exist to grade, and the one that triggers a segregated portfolio in a mutual fund.
- Face valueThe denomination a company's capital is divided into and carried in its books — fixed, printed on the certificate, and the base on which dividend percentages and stock splits are computed.
- Primary marketThe market where an issuer sells securities to investors for the first time and receives the money itself — the "new issue market", as against the secondary market where investors trade among themselves.
- Secondary marketThe market where securities already issued are traded between investors — the money goes to the selling investor, not to the company, and the issuer's capital is unchanged.
Where this is taught
- Series II-B · Chapter 1: Introduction to Securitiesintroduced here
- Series II-A · Chapter 1: Introduction to Securitiesintroduced here
Related terms
- ADR, GDR and IDRDepository receipts represent shares of a company in one country but trade on an exchange in another — American inside the US, Global outside it, Indian for foreign shares listed here.
- Authorised capitalThe maximum amount of share capital a company is allowed to issue, fixed in its Memorandum of Association — a ceiling on what can be created, not money the company has.
- Convertible debenturesDebentures that turn into equity shares on terms fixed at issue — the investor draws a coupon until conversion, and the company settles the debt in shares instead of cash.
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