What is share capital?

Share capital, also known as equity financing, is the money invested in a company by its shareholders. Share capital rewards shareholders with a piece of the company.

The share capital a company reports is only the money it receives during the original offering of shares and includes preferred and common shares. So, when a company opens up to public sharing, only the initial funds are considered part of its share capital.

Once share capital has been purchased, the company owns the money. Shareholders, or those people who initially invested in the company, are rewarded for their investment with dividends and an increase in the value of the business if it is ever sold.