- Shareholders Equity
- Shareholders Equity Statement
- Equity Formula
- Paid in Capital
- Shareholder's Equity Formula
- Equity Examples
- Shares Issued
- Proxy Statement
- Negative Shareholders Equity
- Par Value of Stock
- Nominal Value of Shares
- Par Value of Share
- Premium on Stock
- Ordinary Shares Capital
- Share Classes
- Ordinary Shares
- Book Value of Equity
- Book Value Formula
- Shares Premium
- Share Capital
- Stock Certificate
- Common Stock Formula
- Class A Shares
- Diluted Shares
- Global Depository Receipts (GDR)
- Stock Dilution
- Floating Stock
- Outstanding Shares (Definition, Formula) | Stocks Outstanding
- Issued vs Outstanding Shares
- Additional Paid-in Capital on Balance Sheet
- Retained Earnings (Formula, Examples) | How to Calculate?
- Retained Earnings Formula
- Statement of Retained Earnings
- Appropriated Retained Earnings
- Unappropriated Retained Earnings
- Statement of Retained Earnings Examples
- How to Calculate Net Worth of a Company | Formula | Top Examples
- Net Worth Formula
- Tangible Net Worth
- Owners Equity
- Owner's Equity Formula
- Owner's Equity Examples
- Preferred Shares
- Callable Preferred Stock
- Redeemable Preference Shares
- Non-Cumulative Preference Shares
- Participating Preferred Stock
- Weighted average Shares average outstanding
- Share Buyback
- Accelerated Share Repurchase
- Restricted Stocks Units (RSUs)
- Contingent Shares
- Stock Splits Share
- Reverse Stock Split
- Treasury Stock Shares
- Dilutive Securities
- Anti Dilutive Securities
- Dividend Policy
- Types of Dividends
- Dividend Examples
- Is Dividend Expense?
- Dividend Policy Types
- Dividend Reinvestment Plan
- Dividends Ex-Date vs Record Date
- Dividend Declared
- Dividend Payable
- Stock Dividend
- Cash Dividend
- Final Dividend
- Preferred Dividends
- Homemade Dividends
- Ex dividend date
- Date of Record of dividends
- Qualified vs Ordinary Dividend
- Equity vs Royalty
- Commodity vs Equity
- Shares vs Debentures
- Equity vs Shares
- Equity Shares vs Preference Shares
- Wealth vs Profit Maximization
- Cost of preferred Stock
- Common Stock vs Preferred Stock | Top 8 Differences You Must Know
- Stocks Vs Shares
- Shares Vesting
- Stock Warrant
- Employee Stock Option Plan (ESOP)
- Non-Qualified Stock Options
- Stock Options Vs RSU
- Shareholder Equity vs Net Worth | Top 5 Differences You Must Know!
- Stock vs Option
- Stock vs Mutual Funds
- Accounting Basics (80+)
- Bookkeeping (52+)
- Balance Sheet (30+)
- Assets (109+)
- Liabilities (68+)
- Income Statement (158+)
- Cash Flow Statement (17+)
- Accounting Careers (26+)
- Accounting Books (8+)
- Budgeting in Finance (31+)
The key difference between Equity Shares vs Preference Shares is that Equity shares are the ordinary/common stock of the company which is required to be issued mandatorily by the companies and which gives the investors right to vote and participate in the meetings of the company whereas preference share capital carries preferential right over the equity share capital in terms of receiving dividend and repayment of their amount invested during the company goes into liquidation but preference shareholders are not entitled to vote and participate in the meetings of the company.
Equity Shares vs Preference Shares Differences
The corporate world has its own capital structure like share capital, debt fund as well as reserves and surplus. Every corporate has mandatory to issue share capital to raise the fundamental capital for the company. Share capital can be of various kinds like equity share capital, preference share capital, etc.
Equity and preference shares are just like two sides of the coin, have their own pros and cons. Dividends of equity will be highly dependent on the performance of the company while of preference shares it is fixed and is needed to be paid.
- Equity shareholders are the real risk bearer of the company as they have the residual share in the event of liquidation;
- The preference shareholders have a preference with respect to higher claims on earnings and assets and dividend rate is fixed, with no voting rights and the possibility for participating in dividends in times when the performance of the company is good.
What is Equity Share Capital?
The equity share capital is the basic share capital that every company has to issue mandatorily. Equity shares holders are the residual interest holder in the company assets, Equity shares are also termed as ordinary share capital belonging to the capital structure of the owners’ capital.
4.9 (1,067 ratings)
What is a Preference Share Capital?
Preference share capital means the shares with preference over the other equity capital of the shareholders’ capital. Such share capital is having preference over the dividend and repayment at the time of liquidation.
Let us take an example of Equity shares vs Preference Shares,
ABC Limited issued
- The equity share capital of $50 million, 5 million shares of $10 each.
- The preference share capital of $5 million, 500,000 shares of $10 each.
Here preference shareholders will be having preferred rights over equity shared of the company.
Equity Shares vs Preference Shares Infographics
Here we provide you with the top 13 difference between Equity Shares vs Preference Shares
Equity Shares vs Preference Shares Key Differences
The key difference between Equity Shares vs Preference Shares are as follows –
- Equity shares are the ordinary common stock of the company while preference shares are having specific preferential rights over the equity shares of the company
- Equity shares do not have the right to compulsorily receive dividend while preference shares based on their type of issue, entitled to receive the dividend every year
- Equity shares have voting right in the general meeting of the company while preference shares do not have any voting right in general meeting.
- Equity shares are having the right to participate in the management of the company while preference shares are not entitled to participate in the management of the company.
- For the company, it is compulsorily to repay back the funds to the preference shareholders while it is not mandatory to repay back the funds of equity shares
- Preference shares can get converted into equity shares while equity shared cannot get converted to preference shares
- Equity shares are entitled to the bonus shares while preference shares are not entitled to the bonus shares against their existing holding.
- In Preference shares, are medium or large investors invest their funds while in equity shares, even small shareholders can also afford to invest.
Equity Shares vs Preference Shares Head to Head Difference
Let’s now look at the head to head difference between Equity Shares vs Preference Shares
|Basis – Equity vs Preference Shares||Equity Shares||Preference Shares|
|Define||Equity share is the foundation capital of the company.||Preference shares are the shares which promise the holder to have some preference over the Equity shares of the company|
|Dividend||Equity shares do not have a mandatory right to receive dividend||Preference shares based on their time of non-cumulative or cumulative, are entitled to the dividend|
|Rate of Dividend||A rate of the dividend of equity shares is fluctuating||The rate of a dividend of preference shares is fixed.|
|Voting||Equity shares have voting right in general meetings.||Preference shares do not have any voting right|
|Compulsory Repayment||Equity shares never mandatorily to be repaid back to the investors.||A preference share is compulsorily repayable to their investors|
|Types||Equity shares do not have any type, hence they are considered as the ordinary stock of the company.||Preference shares have various types like Convertible-Non convertible, Cumulative-Non cumulative, Participatory-Non Participatory, etc.|
|Liquidation||At the time of liquidation, Equity shareholders will have a residual right over the asset of the company even after repayment to preference shares of the company||Preference shareholders will be having first right after repayment of all employee payments, statutory payments, and all kind of secured and unsecured creditors|
|Participation in management||Equity shares are primarily responsible for the management of the company||Preference shares do not have participation rights in the management of the company|
|Conversion||Equity shares cannot get converted into preference shares.||Preference shares can get converted into equity shares|
|Compulsory to issue||The equity share capital is mandatory to be issued by every company||The preference share capital is not mandatory for all the company to issue|
|Tradable||Equity shares are tradable in the market through a stock exchange||Preference shares are not tradable in the market|
|Bonus Shares||Equity shares are entitled to the bonus issue against their existing holding.||Preference shares are not entitled to the bonus issue against their existing holdings|
|Denomination||Equity shares are generally of smaller denomination hence even small investors can invest in it.||Preference shares are generally of high denomination, hence medium and large investors can afford to invest in the preference share capital.|
Investors need to gain complete knowledge about the various forms of investments, as it is highly probable of heavily suffering the losses due to wrong trade is undertaken. At the time of investing the funds, the golden rule is to acquire the shares of stock when the prices are down and sell them when the prices of shares are on the upside. Also, a real investor should go for a long-term horizon; it will give them good returns for longer periods. This is how one can earn a handsome profit and can fulfill the target of achieving the best returns out of their profit.
This has been a guide to Equity Shares vs Preference Shares. Here we also discuss the top differences between Equity Shares and Preference Shares along with infographics and comparison table. You may also have a look at the following articles –