Question

The part of profit or other surpluses of a company distributed proportionately among shareholders is called:

• A. Preference shares
• B. Equity share
• C. Face Value
• D. None of these

Hint:

Equity shareholders are typically the primary beneficiaries of a company’s profits, as they have a claim on the residual value after all other expenses.

Answer 1

The Correct Option is B

Step 1: Understanding the distribution of profits.
Equity shareholders are entitled to a portion of the company’s profits in the form of dividends. This is distributed proportionately based on the number of shares held.
Step 2: Analyzing the options.
- (a) Preference shares: Incorrect. Preference shares give fixed dividends but are not based on profit distribution to all shareholders.
- (b) Equity share: Correct, as equity shareholders receive a part of the company's profits.
- (c) Face Value: Incorrect. Face value refers to the nominal value of a share, not its profit-sharing rights.
- (d) None of these: Incorrect, as the correct answer is (b).
Step 3: Conclusion.
The correct answer is (b), as equity shares entitle holders to a proportionate share of profits.