Ordinary Share Capital

Ordinary shares are the most common type of shares that are issued by a company. The ordinary share holders will be owners of the company. Ordinary shareholders will take the highest risk by investing in shares of a company. This is because of the following two reasons

• The return to the ordinary shareholders which is the ordinary share dividend will be paid only if distributable profits are available after providing all the other providers of finance and if the directors proposed to pay a dividend.

• At the time of liquidation the ordinary share capital will be repaid only often providing a return of the investments made by other providers of financing

Since the ordinary shareholders take the highest risk by investing, they will also require the highest return to compensate the highest risk taken by the ordinary shareholders.