Question
Distinguish between equity share capital and preference share capital.
| Points ** difference | Equity share capital | Preference share capital |
| Compulsion | A company needs to compulsorily issue these shares | A company may or may not issue these shares. |
| Rate of divided | Rate of dividend varies | Rate of dividend is fix |
| Rights | Equity share holders have the right to attend meetings and to vote and elect directors | Generally, preference shareholders do not have voting rights except matters related to their interests |
| Risk | Risk is more | Risk is less |
| Investors interest | Investors interested in taking high risk and speculation prefer equity shares | Investors interested in fixed income and safety of capital prefer preference shares. |
| Market price | Market price of these shares increase and decrease | Market price generally remains steady |
| Addition of capital | Capital can be raised by rights shares and bonus shares | Capital cannot be raised |
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