When it comes to corporate equity, we often hear the words "dividend right" and "equity". Although they are all related to the interests of the business, there are clear differences in terms of definition, nature and impact.
1.Differences in definition.
The right to dividends, as the name suggests, is the right of shareholders to receive dividends from the company's profits. This right is usually calculated based on the proportion of shares held by the shareholder. As soon as the company declares the distribution of dividends, shareholders are eligible to receive dividends in proportion to their shareholdings. However, it is important to note that having the right to dividends does not mean that the holder has ownership of the company.
Equity, on the other hand, represents the ownership of the company by the shareholders. It includes not only the right to dividends, but also other rights such as voting rights, decision-making rights, etc. Shareholders who hold equity can not only receive dividends from the company's profits, but also participate in the company's major decisions, elect board members, and have an opinion on the direction of the company's operations.
2.Qualitatively different.
The right to dividends is more related to earnings, and it is one of the main motivators for shareholders to invest in the company. Because investors who hold the right to dividends can get a direct return on the company's profits. However, the right to dividends does not give the holder the right to participate in the operation and management of the company.
In contrast, equity is more integrated. It represents the shareholder's overall ownership of the company, including assets, liabilities, benefits and risks. Shareholders who hold equity can not only receive dividends, but also participate in the company's management and decision-making. This also means that equity holders need to take on more responsibilities and risks.
3.Differences in impact.
The existence of a dividend right can encourage investors to buy a company, as it provides them with a relatively stable income. This helps to increase the company's capital liquidity, which makes it easier for the company to expand and grow.
The holder of the equity needs to be responsible for the long-term development and management of the company. Their decisions have a direct impact on the direction of a company's operations, market share, and profitability. This also means that the transfer or change of equity may have a profound impact on the stability and future development of the company.