Explore Preference Share Capital with the Help of Experts
Preference shares are commonly termed as preferred stock. The financier, who has preference shares, can enjoy the dividends at a fixed rate and get the amount before the dividendof equity shares.At the time of bankruptcy,company has to pay its preference shareholders from the company’s assets.
But like the equity shareholder they do not enjoy the rights of voting but enjoy the other facility of equity share and debenture both. If you required more information for doing your home assignments you should contact 24x7assignmenthelp.com for Preference Share Capital homework help.
Different types of Preference Share Capital
Four types of preference share are there in the capital market. They are:
- Cumulative Preference Shares
These types of shares are accumulated still full of payment. If the company fails to pay, then unpaid dividend turned as arrears and carry forward to the next year.
- Non-Cumulative Preference Shares
They do not enjoy the rights of getting arrears. If thecompany fails to pay, the payment is not carry forward in future.
- Redeemable Preference Shares- They can be repaid after it is expired
- Non-Redeemable Preference Shares
This type of shares cannotbe repaid during the company’s lifetime, only at the time of company’s liquidation.
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Difference between Preference and equity shares
- Equity share is repaid at the end, but the preference share is repaid before equity share.
- The rate of dividend for equity is uncertain, but the same in preference sharesis fixed.
- There is no redemption facility or facility of getting arrears in equity shares, but preference shares has redemption facility as well as getting arrears facility too
- Equity shareholder can enjoy the voting rights in every situation, but preference shareholdergenerallydoes not have voting rights they only enjoy the same in a special situation.
- Equity shares can never be convertedto preference shares, but preference shares can be convertedto equity shares.
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More about Preference Share Capital:
Though preference share has many advantages likeother things, it has some disadvantages too. They are:
- Returns are fixed so there is not any further gain too
- Returns are lower than the equity share
- No voting power
- There are no challenges
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