Elucidate what do you mean by Equity

Question

Elucidate what do you mean by Equity?

Answer 1

Shares represent ownership interests. Shareholders have a claim to the residual value of the corporation after all debts and other claims have been paid. Dividends are a repayment of capital. They are paid out of after-tax profits and thus are not tax-deductible by the corporation. If dividend payments are not made, shareholders may have no remedy. On dissolution of the corporation, at least one class of shareholders will receive property that remains after all other claims have been paid.