Question

Differentiate between preference shares and equity shares.

Answer 1

Difference between equity shares and preference shares :

$\begin{array}{cccc}\text{S.No.}& \text{Basis}& \text{Equity shares}& \text{Perefence shares}\\ 1.& \text{Nominal value}& \text{The nominal value of equity}& \text{Nominal value of preference shares is}\\ & & \text{shares is generally low.}& \text{generally high.}\\ 2.& \text{Payment of Dividend}.& \text{Payment of equity dividend is made}& \text{Payment of preference dividend is}\\ & & \text{after the payment of preference}& \text{made before the payment of equity}\\ & & \text{dividend.}& \text{dividend.}\\ 3.& \text{Refund of capital}& \text{Refund of equity share capital is}& \text{Refund of preference share capital}\\ & & \text{made after the refund of preference}& \text{is made before the refund of equity}\\ & & \text{share capital.}& \text{share capital.}\\ 4.& \text{Accumulation of}& \text{In case of equity shares, arrears of}& \text{In case of preference shares, arrears}\\ & \text{Dividends}& \text{dividend cannot accumulate any case.}& \text{of dividend may accumulate.}\\ 5.& \text{Volting Rights}& \text{They generally carry voting rights.}& \text{No voting rights except when}\\ & & & \text{dividend remains unpaid for specific}\\ & & & \text{period.}\end{array}$