Exercises · Q5
Q.Distinguish between Equity Shares and Preference Shares.
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Start your 14-day free trial to unlock the full solution →| Basis | Equity Shares | Preference Shares |
|---|---|---|
| Rate of dividend | Fluctuates — not fixed, depends on profits and Board's recommendation | Fixed rate, stated at the time of issue |
| Priority for dividend | Paid only after preference dividend is paid | Paid first, ahead of equity |
| Priority for capital repayment (winding up) | Repaid only after preference shareholders and all outside liabilities | Repaid before equity shareholders |
| Voting rights | Normally full voting rights, proportionate to shareholding | Normally no voting rights, except in specified circumstances |
| Nature | Real, risk-bearing ownership capital | Hybrid capital — fixed-return feature with limited ownership features |
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