Question 31 of 40
Q.State the differences between Preference shares and Equity shares.
Puducherry TnboardTamil Nadu HSC (DGE) Commerce Board 2024Subjective· 3mImportance★★★★★
78% · 31/40 Questions
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Start your 14-day free trial to unlock the full solution →Preference shares = fixed dividend, prior right to dividend and to repayment of capital, normally no vote. Equity shares = variable dividend, residual/last claim, full voting rights.
Both are types of share capital a company can issue, but they differ on several points:
| Basis of Distinction | Preference Shares | Equity Shares |
|---|---|---|
| Rate of dividend | Fixed rate of dividend | Fluctuating — depends on profits available |
| Priority of dividend | Paid before equity shareholders | Paid only after preference dividend |
| Repayment of capital | Repaid first at the time of winding up | Repaid last, after all other claims |
| Voting rights | Normally do not carry voting rights | Carry full voting rights (control the company) |
| Arrears of dividend | Can accumulate if cumulative | Cannot accumulate — no arrears |
| … |
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