Difference Between Equity And Preference Share
The main dissimilarities or difference between equity shares and preference shares can be pointed out as follows:
1. Meaning
Equity Shares: Types of shares that do not enjoy preferential rights on dividend and capital refund.
Preference Shares: Types of shares that carry preferential rights on dividend and capital refund.
2. Dividend Payment
Equity Shares: Dividend is paid after paying liabilities and preference dividend
Preference Shares: Dividend is paid before equity shareholders.
3. Dividend Rate
Equity Shares: It depends upon the profit available
Preference Shares: Fixed dividend rate for all years
4. Redemption
Equity Shares: Not redeemable
Preference Share: Yes it is redeemable
5. Voting Right
Equity Shares: Shareholders enjoy voting right
Preference Share: No voting right for preference shareholders
6. Convertibility
Equity Shares: No
Preference Shares: Yes
7. Return Of Capital
Equity Shares: After the payment of all capitals and preference shares
Preference Share: Before equity shares
8 Management Participation
Equity Shares: Yes
Preference Shares: No
Also Read:
Also Read:
9. Arrears Of Dividend
Equity Shares: No provision
Preference Shares: Yes
10. Financing Period
Equity Shares: Long term financing
Preference Shares: Medium term financing
Equity Shares Vs Preference Shares (Comparison Chart)
I hope this post is helpful to understand the difference between equity shares and preference shares and to make comparison between them.
Equity Shares Vs Preference Shares (Comparison Chart)
Basis For Difference
|
Equity Share
|
Preference Share
|
Introduction
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Shares that do not carry preferential right on dividend and capital refund
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Shares that enjoy preferential right on dividend and capital refund
|
Dividend Payment
|
After preference share
|
Before equity share
|
Rate Of Dividend
|
According to the profit
|
Fixed rate
|
Redeemable ?
|
No
|
Yes
|
Voting Right
|
Yes
|
No
|
Convertibility
|
No
|
Yes
|
Return Of Capital
|
After the payment of preference shares
|
Before the payment of equity shares
|
Management Participation
|
Yes
|
No
|
Arrears Of Dividend
|
No
|
Yes
|
Financing Period
|
Long-term
|
Medium-term
|
I hope this post is helpful to understand the difference between equity shares and preference shares and to make comparison between them.
