UK Accounting Glossary
Equities is another name for shares or stocks. To have equity in an asset is to own a piece of it; equities is used more broadly to mean ownership interests in companies. Equities are distinguished from bonds, which represent loans to the issuer. Holders of equities may or may not receive dividends of varying size, depending on the company’s earnings and dividend policy. Bondholders receive regular interest payments. Both the prices of equities and bonds may go up or down. But in general, the prices of equities are more volatile, and holders of equities are more likely to look to capital appreciation (an increase in stock price) to provide a suitable return on their investment. Because of the greater likelihood of capital appreciation but the more uncertain outlook for a consistent stream of cash payments, equities are usually the more aggressive investment. However, equities are as diverse as the companies they represent. Some equities offer consistent dividend payments but only slow, if steady capital appreciation. Other equities offer no dividends, but the real, if uncertain, prospect of large price increases.
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This glossary post was last updated: 9th February 2020.