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Whats the difference between Preference shares and Equity Shares ??

In the Preference shares the rate of dividend is fixed and at the time of winding up preference share capital is repaid before equity,preference share holders do not have participation in the management of the company and only in special circumstances they have voting right, risk is lesser than equity shares ,whereas,

In the equity shares the rate of dividend is not fixed,it is decided by the board of directors and the equity shareholders have voting right under all the circumstances,they can also participate in the management of the company,the risk is higher in this case because if a company earned loss in a financial year then they may not receive dividend for that year,in addition to this payment of dividend is not mandatory it depends on the company's decision. Equity shareholders bearing high risk may also get higher return.

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1)Preference Shares have 2 preferences first payment of dividend in every year in which dividend is proposed first share capital of preference shares will be payab;e @ winding up or liquidation of the company,where as equity share holders dividend after preference share holders even share capital capital is also paid after paying to preference share holders.2)preference share holders are not owners of the company and do not enjoy any voting right. Where as Equity Shares has voting right they are the real owners of company.3)Preference Shares have a finite tenure and carry a fixed rate of dividend where as dividend to equity shares is payable rest of the dividend payable after preference share holders.

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