What is the difference between Equity Shares and Preference Shares?


Equity Shares; Preference Shares; Difference between equity shares and preference shares

Equity Shares:


  • Meaning: Equity shares are those shares who do not enjoy any preference as regards payment of dividend and repayment of capital.

  • Rate of Dividend: The rate of dividend on equity shares is not fixed. It fluctuates, as it depends on the profits made by a company i.e. higher the profits, higher the dividend, lower the profits, lower the dividend.

  • Return of Capital: Equity shareholders are paid their capital after the preference shareholders are paid.

  • Voting Rights: They have normal voting rights.

  • Classification: Equity shares have no classification.

  • Right of Dividend: Equity shares receive dividend after it is paid to preference shares.


Preference Shares:

  • Meaning:Preference shares are those shares which enjoy preference as regards payment of dividend and repayment of capital.

  • Rate of Dividend: The rate of dividend on preference shares is fixed.

  • Return of Capital: Preference shareholders are paid their capital first.

  • Voting rights: Preference shareholders do not have normal voting rights.

  • Classification: Preference shares are classified into many types like cumulative preference shares, non-cumulative preference shares, convertible preference shares, non-convertible preference shares, participating preference shares, non-participating preference shares, redeemable preference shares and irredeemable preference shares.

  • Right of Dividend: These shareholders receives dividend first.


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