Difference between preference shares and equity shares
Answers
Answer:
Equity shares are the ordinary shares of the company representing the part ownership of the shareholder in the company. Preference shares are the shares that carry preferential rights on the matters of payment of dividend and repayment of capital. The dividend is paid after the payment of all liabilities.
Answer:
Explanation:
1-meaning-equity shares are those shares which does not enjoy any preference regarding payment of dividend and repayment of capital.
-preference shares are those shares which enjoy certain preference over equity shares regarding payment of dividend and repayment of capital
2-rate of dividend-rate of dividend on equity shares fluctuating.it depends upon profit of the company.ifcompany earn good profit,equity shareholder get good dividend and vice-versa.
-rate of dividend on preference shares is fixed and predetermined at the time of issue .at present maximum permissible rate of dividend is 14%p.a.
3-voting rights-equity shareholder are real ownerof the company so they enjoy normal voting rights.they have right to vote on all resolution passed at general meeting of the company.
-preference shareholder are not real owner of the company so they does not enjoy normal voting rights .they have voting rights only for those matter which affect on their interest.
4-nature of capital-equity share capital is permanent capital.it is now as risk capital.
-preference share capital is safe capital with stable return.
5-face value-normally,equity share are issued for lower face value i.e. RS 1 or RS 10.
-normally,preference shares are issued for higher face value i.e. RS 100 and so on.
6-market value-market value of equity shares changes as per financial position and profitability of company .so there is possibility of capital appreciation.
-market value of preference share do not change.it remain constant so there is no possibility of capital appreciation.
7-bonus issue and right issue-equity shareholder are eligible for bonus shares and right issue of the company.
-preference shareholder are not eligible for bonus shares and right issue of the company.
8-types-equity shares are classified into:A] equity shares with normal voting rights . B]equity shares with differential voting rights.
-preferences shares are classified into: A]cumulative preference share B] non-cumulative preference share C]convertible preference share D]non-convertible preference share E]redeemable preference share F]irredeemable preference share G]participating preference share H] non-participating preference share.