Difference Between Equity Shares And Preference  Shares -stockdaddy (1)
                     Difference Between
Equity Shares And 
Preference
Shares
Introduction
Companies required money to run their business. Money work as the lifeline for any business.
Companies raise capital by issuing share of the company. So company divided its capital  into 
small parts of the equal values and each part is called a shares  and each shares of the 
company carried equal values of company ownership.
This is one of the popular way of raising capital for company and through this individual user 
can also take a part in the ownership and get benefit. 
There are two types of shares issued by the company for the expansion of the company. 
1. Equity Shares
2. Preference shares
What are Equity Shares?
● The amount raised by issuing equity shares is the 
money of the company, since they are securities 
issued under its share capital.
● When a company needs a large amount of funds for a 
long period of time, equity shares are a common 
source of long-term capital.
● Equity shareholders are also called common 
shareholders as they do not have any preferential 
rights like preference shareholders.
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What are Preference Shares
● Preference shares are those shares that give special 
preferences right to its shareholder in concern to dividends 
payment and liquidation. Which are primary advantages of 
preference shareholders. Over equity shareholders.
● Preference shares are also known as hybrid shares. 
Because they also carry the features of debentures  and 
equity shares.
● Preference shares have a fixed rate of dividends attached 
to them similar to that of debentures in most cases. 
preference shareholders are received dividends when the 
company is in a position to do so.
Difference between Equity Shares and Preference Shares
.
Equity Shares Preference Shares
Definition Equity shares are common shares with Preference Shares are shares that give 
no preference rights over other preferential rights to its shareholders over 
shareholders. dividends & in case of liquidation over equity 
shares.
Dividend Preference Equity shareholders are given dividends Preference shareholders are preferred over 
after fulfilling all other external liabilities equity shareholders when it comes to dividend 
and dividends to payment to preference payment as they have a preferrential right of 
shareholders. receiving dividends over equity shareholders 
whenever the company decide to give dividends.
Redemption of Shares Equity Shares cannot be redeemed by Preference shares can be redeemed by the 
the company until the company is in company after a fixed period of time or after the 
existence. completion of its maturity period.
.
Voting Rights Have Voting Rights. Preference shareholders do not enjoy any such voting rights.
Dividend Payment Equity shareholders do not have a fixed rate of Preference shareholders receive a predetermined fixed rate 
dividend and Equity Shareholder receive dividend at irrespective of the quantum of profit incurred by the company.
end.
Liquidation In case of liquidity : Equity shareholder  will get claim In this case preference shareholder will be preferred over 
in last, after external debt and  preference equity shareholders.
shareholder.
Dividend Arrears In case of not payment of dividend in particular year, In preference shares if in case of not payment of dividend in 
the dividends are not transferred to next year. particular year, the dividends are transferred to next year.
Convertibility Preference shares can be converted into equity shares, if 
Equity shares cannot be converted into preference they are convertible preference shares.
shares.
Risk Equity shareholders are at higher risk as their Preference shareholders are at a lower risk in because they 
dividend payment depends on the profits incurred by receive fixed rate of dividend every year and get first 
a company. preference over equity shareholders.
Types of Equity Shares
1. Authorized Share Capital
2. Issued Share Capital
3. Subscribed Share Capital
4. Paid-up Share Capital
5. Called-up Share Capital
6. Rights Issue
7. Sweat Equity Shares Bonus Shares
Know about the feature of equity shares and preference shares
Types of Preference Shares
1. Cumulative Preference Shares
2. Non-Cumulative Preference Shares
3. Convertible Preference Shares
4. Non-Convertible Preference Shares
5. Redeemable Preference Shares
6. Non-Redeemable Preference Shares
7. Callable Preference Shares
8. Adjustable-Rate Preference Shares
9. Convertible Preference Shares
Know in-depth about the features and types of preference shares.
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