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## Equity Shares vs. Preference Shares ### Equity (Ordinary) Shares - **Meaning**: Equity shares provide permanent capital to the company. The shareholders enjoy rewards as well as bear risks of the company. - **Preferences**: They do not enjoy preference over preference shareholders in terms of r...

## Equity Shares vs. Preference Shares ### Equity (Ordinary) Shares - **Meaning**: Equity shares provide permanent capital to the company. The shareholders enjoy rewards as well as bear risks of the company. - **Preferences**: They do not enjoy preference over preference shareholders in terms of receiving dividends and repayment of capital. - **Dividend Rate**: The dividend rate is not fixed. The rate depends upon the profits of the company in each year. - **Nature of Capital**: They provide permanent capital to the company. - **Voting Rights**: The equity shareholders enjoy normal voting rights. - **Nature of Investors**: Those investors who are ready to take higher risk invest in equity capital. - **Types**: There are two classes of equity shares - equity shares with voting rights and equity shares with differential voting rights. - **Capital Appreciation**: There is considerable capital appreciation, in the case of profitable companies. ### Preference Shares - **Preferences**: Preference shares enjoy certain preferences, as to payment of dividends and repayment of capital, over the equity shareholders. - **They enjoy preference over equity shareholders in terms of payment of dividends and repayment of capital at the time of winding up**: The rate of dividend is fixed. The rate of dividend differs from one company to that of another. - **They may provide temporary capital as there are redeemable preference shares**: They do not enjoy normal voting rights, except on those matters which affects their interest. - **Cautious investors may prefer to go for preference capital**: There are several classes, such as cumulative/non-cumulative, convertible/non-convertible, etc. - **There is less capital appreciation**. But, the value of convertible preference shares has more potential for capital appreciation.