what is the difference between equity share and preference share

Difference Between Equity Shares And Preference Shares

What are Equity Shares

It is the company's money that is raised by issuing equity shares because equity shares are securities issued under the company's share capital.

A company typically issues equity shares when it needs a huge amount of funding over a long period of time, and equity shares are an important source of long-term capital.

Because equity shareholders do not have any preferential rights like preference shareholders, they are also known as common shareholders.

What are Preference Shares

A preference share is one that has a preferential right when it comes to dividend payments and liquidation.

Preference shareholders are preferred to equity shareholders in these areas.

Because preference shares combine both the features of debentures and equity shares, they are often called hybrid shares. On the balance sheet, all funds raised by issuing preference shares are classified as Preference share capital. Preferred share capital is primarily used in the capital structure for expansion or day-today operations.

Preferred shareholders have the same dividend rate as debentures, and in most cases they are paid dividends when the company has the ability to do so, as is the case with equity shareholders. That is why these shares are also called hybrid shares.

Preference shares are of different types and have varied characteristics. The preference shareholders, however, do not have any voting rights, and therefore do not have any influence over the company's activities.

The types of preference shares allow them to be converted into equity shares, and companies can also bring them back if they wish. Know in-depth about the features and types of preference shares.

Know what is the difference between equity shares and preference shares