Equity is an ownership share in a revenue stream of a business’ income upon satisfactory completion of established prior obligations.
In regards to equity, there are three major types:
- Common Stock: Common stock is ownership in a corporation. Common stock is vital to a company’s accountability to the public. Common stockholders are the mewling peasants who shout about who they want to be on the board of directors, senior officers, and other governance matters.
- Preferred Shares. Preferred shares are stock in a company with a defined dividend and have priority on revenue over the lowly peasants known as common stockholders (I’m a common stockholder too). Preferred shares are more secure investments and have a more significant promise of payout, but you forfeit your right to vote by choosing this.
- Stock owners use warrants to kick down company doors and execute public justice. That sounds pretty cool, so you know it must be fake. After all, this is a glossary of accounting terms. Warrants are long-dated options that permit their owners to participate in a firm’s capital gains and losses without needing to purchase common stock first. As such, warrants have an exercise price that allows holders to convert them into common shares. Why would you want to become part of the rabble? Because warrants also have an expiry date; use it or lose it.