Preference Shares are a financial instrument used by companies to raise capital that comes with the dividend option for shareholders.
Ordinary Shares are also a financial instrument used by companies to raise capital that comes with voting rights for the shareholders.
Shares Information
A share represents a unit of equity ownership in a company. Shareholders are entitled to any profits that the company may earn in the form of dividends. They are also the bearers of any losses that the company may face.
What are different types of shares?
1) Ordinary Shares.
2) Preference Shares.
3) Redeemable Preference Shares.
4) Convertible Preference Shares.
5) Treasury Shares.
1) Ordinary Shares
Ordinary shares, also known as common shares, are defined as shares of a company that give shareholders the right to vote in the company’s meeting and also an income in the form of dividends from the corporation’s profits.
2) Preference Shares
Preference shares (preferred stock) are company stock with dividends that are paid to shareholders before common stock dividends are paid out. There are four types of preferred stock – cumulative (guaranteed), non-cumulative, participating and convertible.
3) Redeemable Preference Shares.
Redeemable preference shares are those shares where the issuer of the share has the right to redeem the shares within 20 years of the issuance at the predetermined price mentioned in the prospectus at the time of issuance of preference shares.
4) Convertible Preference Shares.
A preference share that is issued on the terms that it is liable to be converted to an agreed number of ordinary shares or cash: At a certain time or on the happening of a particular event (for example, on the sale or initial public offering of the issuing company).
5) Treasury Shares.
Treasury stock is formerly outstanding stock that has been repurchased and is being held by the issuing company. Treasury stock reduces total shareholders’ equity on a company’s balance sheet, and it is therefore a contra equity account.
Types of shares Australia :
There are three main types of shares in Australia
1) Ordinary shares.
2) Preference shares.
3) Partly-paid shares.
Difference between ordinary shares and preference shares.
Preference Shares Ordinary Shares
Defination :- Preference Shares are a financial instrument used by companies to raise capital that comes with the dividend option for shareholders. Defination :- Ordinary Shares are also a financial instrument used by companies to raise capital that comes with voting rights for the shareholders.
Rate of Divident :- The rate of dividend is fixed for preference shares. Rate of Divident :- There is no fixed rate of dividend for ordinary shares.
Voting Rights :- Preference shareholders do not have any voting rights for taking crucial decisions related to the company. Voting Rights :- Ordinary shareholders have voting rights for taking crucial decisions related to the company.
Bonus Shares :- Preference shareholders are not eligible for getting any bonus shares from the company. Bonus Shares :- Ordinary shareholders are eligible for getting bonus shares from the company.
Role In Management :- Preference shareholders do not have a role in the management of the organization. Role In Management :- Ordinary shareholders have a role in the management of the organization.
Types Of Preference Share
1) Cumulative preference shares
2) Noncumulative preference shares
3) Participatory preference shares
4) Convertible preference shares
Conclusion
Well their are many differences in ordinary share and preference share but most common are Voting rights, Dividend priority, liquidation priority, dividend amount.
A share represents a unit of equity ownership in a company. Shareholders are entitled to any profits that the company may earn in the form of dividends. They are also the bearers of any losses that the company may face.