A measure of equity that represents the ordinary/ common shareholders’ interest in an entity. This interest (residual interest) is manifested in respective ordinary equity shares in the entity. Ordinary equity may come with voting rights (voting ordinary equity) or without (non-voting ordinary equity).
This type of equity has no priority for dividends (as opposed to preference or preferential shares) or for remaining assets in case of bankruptcy.
Ordinary equity is a component of equity capital. An entity’s capital (equity capital/ share capital) is divided into shares of stock, each corresponding to a small chunk of equity ownership, virtually with perpetual nature. In other words, ordinary shares are perpetual instruments that do exist, and continue to do so, as long as the issuer is a going concern.
Ordinary share (a term used in the United Kingdom) is also known as voting share and common stock ( in the United States). In the UK, common stock is known as equity share.
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