Question
State the different between Equity share and preference share.
| No. | Points of Difference | Equity Share | Preference Share |
| $1.$ | Compulsion | It is compulsory for every public company to issue Ordinary Share. if the type of share is not specified, all shares are considered as Ordinary Shares. | It is not compulsory for every company to issued any type Preference Share. |
| $2.$ | Rate of Dividend | The rate of dividend is not fixed. The change in profit affects the dividend. | The Change in Profit doesn't affect the dividend. |
| $3.$ | Right of voting | The Ordinary Shareholders of the company have right of vote over all the resolutions presented in the company. | Preference shareholders possess the right of voting in the matters concerning them only. |
| $4.$ | Risk | It is more risky because the rate of dividend is fixed and it has the last right for getting the dividend and refund of capital. | The risk factor is less because the rate of dividend is fixed and has the first right for getting dividend and refund of capital. |
| $5.$ | Regarding Repayment of Capital | At the time of dissolution of the company, they get the refund if capital remains after making repayment to Preference Shareholders only. | At the time of dissolution of the company, they get the priority regarding the repayment of money over the Ordinary Shareholders. |
| $6.$ | Market Price | As the rate of dividend is not fixed, there are large fluctuations in the market price. So, the element of speculation is more in this type of share. | As the rate of dividend is fixed, there are large fluctuations in the market price. So, there is less speculation in the type of shares. |
| $7.$ | Investors | Those investors who are able to take risk or speculate, invest in this type of shares. | For Fixed and regular income, various investors and who prefer safety of their capital, invest in this type of shares. |
| $8.$ | Share for Qualification | To become a director only this share is considered as a qualification. | To become a director, this shares is not considered as a qualification. |
| $9.$ | Addition in Capital | Shareholders get the advantage of rights shares, bonus shares, so capital grows. | Shareholders do not have the advantage of right shares, bonus shares. Capital does not grow. |
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