Share Capital Quiz

What is the difference between shares and stock?

Shares may be fully or partly paid up, while stock is always fully paid up. Shares may be issued directly to the public after incorporation, while stock cannot be issued directly and just after incorporation. Shares cannot be transferred in fraction because a share is not divisible, while stock may be transferred in fraction. Shares are of equal denomination (nominal value), while stock may be dividend into unequal nominal value. Shares are always serially numbered, while stock is not numbered. Shares are always registered, while stock may be registered or unregistered both.

What are preference shares? What are their classifications?

Preference shares are shares that enjoy preferential rights as regards payment of dividend during the life time of the company and repayment of capital in the event of liquidation. They do not carry any voting right. The classifications are cumulative preference shares and non-cumulative preference shares.

What are the characteristics of cumulative preference shares?

Cumulative preference shares are shares that always accumulate dividends if not paid due to inadequacy of the profits or otherwise. The arrears of dividend have to be paid before any dividend is paid to equity shareholders. However, in case of winding up of a company, the arrears of dividend are payable only if it is expressly stated in the Articles.