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Q.

What is the meaning of equity shares and preference shares?

Tags: money, education, science
Asked by Vidya R, 23 Mar '10 03:51 pm
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Answers (3)

1.

Preference Shares get preference over the Equity (also known as Ordinary) Shares in the matter of : 1. Payment of Dividend and 2. Refund of Capital in the event of winding up of the company. The Pref Shares may be of Cumulative or Non-cumulative; Redeemable or Iredeemable; Convertible or Non-convertible; Participating or Non-participating. Equity (ordinary) Shares do not have any such classification, their holders bear maximum risk
Answered by Anil K Chugh, 23 Mar '10 04:01 pm

 
  
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2.

Preference shares

Definition

Capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. Like common stock, preference shares represent partial ownership in a company, although preferred stock shareholders do not enjoy any of the voting rights of common stockholders. Also unlike common stock, preference shares pay a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability to do so. The main benefit to owning preference shares are that the investor has a greater claim on the company's assets than common stockholders. Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholders. In general, there are four different types of preferred stock: cumulative preferred, non-cumulati ...more
Answered by vilas manohar deshpande, 23 Mar '10 04:10 pm

 
  
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3.

1)Preference Shares have 2 preferences first payment of dividend in every year in which dividend is proposed & first share capital of preference shares will be payab;e @ winding up or liquidation of the company,where as equity share holders dividend after preference share holders & even share capital capital is also paid after paying to preference share holders.

2)preference share holders are not owners of the company and do not enjoy any voting right. Where as Equity Shares has voting right & they are the real owners of company.

3)Preference Shares have a finite tenure and carry a fixed rate of dividend where as dividend to equity shares is payable rest of the dividend payable after preference share holders.

Detailed answer here: http://financenmoney.in/types-of-share/
Source: http://financenmoney.in/types-of-share/
Answered by Roshni, 15 Feb '12 02:54 pm

 
  
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