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What is the difference between equity …

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What is the difference between equity shares and preference shares? Which is more advantageous
  • 1 answers

Yogita Ingle 4 years, 8 months ago

<th>Basis of differentiation</th> <th>Equity shares</th> <th>Preference Shares</th>
Definition Also known as ordinary shares. Equity share is the foundation of the company as it raises fund. These cannot be converted to preference shares Preference shares are the shares which promise the holder a preference over the equity shares. These can be converted to equity shares
Dividend
  • Equity shares do not have right to receive dividend
  • Under this the rate of dividend is fluctuating
  • Under preference shares, based on time, cumulative or non-cumulative are entitled for the dividend
  • Here, the rate of dividend is fixed
Voting rights Voting rights under general meeting Do not have any voting rights
Types These are considered as ordinary shares and thus they do not have any types These come in various types like:
  • Convertible and non-convertible
  • Cumulative and non cumulative
  • Non participatory, etc.
Liquidation During liquidation, shareholders will have residual right over the asset even after the repayment to preference shares of the company The shareholders will have first right after the repayment
Participation rights They are primarily responsible for the management of the company Do not have any participation rights in the company's management
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