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Definition

<p style="text-align: justify;">That portion of <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">share capital</span> which carries <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">risk</span>, and shares in <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">profits</span> through the <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">dividends</span> which are dependent on <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">profitability</span>. <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">Ordinary shares</span> are often called equity shares. Other types of shares which carry less risk, such as convertible or participating <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">preference shares</span> are known as "near-equities". The equity of a company is the share capital plus the reserves of the company - which is the same as its net <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">assets</span> (net of <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">liabilities</span>). As a <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">private investor</span> you will generally be interested only in equity or ordinary shares because, even though they are riskier, they have the potential to give you a good <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">capital gain</span> and a rising dividend as the <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">company</span>’s <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">profit</span> increase</p>