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Difference between‘ Equity share ’and‘preference share’¿?

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Difference between‘ Equity share ’and‘preference share’¿?

Posted by Mani Bhushan 6 years, 10 months ago

CBSE > Class 12 > Accountancy

2 answers

Gaurav Seth 6 years, 10 months ago

<th>BASIS FOR COMPARISON</th> <th>EQUITY SHARES</th> <th>PREFERENCE SHARES</th>

Meaning	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.
Payment of dividend	The dividend is paid after the payment of all liabilities.	Priority in payment of dividend over equity shareholders.
Repayment of capital	In the event of winding up of the company, equity shares are repaid at the end.	In the event of winding up of the company, preference shares are repaid before equity shares.
Rate of dividend	Fluctuating	Fixed
Redemption	No	Yes
Voting rights	Equity shares carry voting rights.	Normally, preference shares do not carry voting rights. However, in special circumstances, they get voting rights.
Convertibility	Equity shares can never be converted.	Preference shares can be converted into equity shares.
Arrears of Dividend	Equity shareholders have no rights to get arrears of the dividend for the previous years.	Preference shareholders generally get the arrears of dividend along with the present year's dividend, if not paid in the last previous year, except in the case of non-cumulative preference shares.

Khushi Khandelwal 6 years, 10 months ago

Equity share holders do not get a fixed rate of dividend while preference shareholders get a fixed rate. Equity shareholders have a right to take part in companies decisions while preference shareholders do not have.

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