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Question
Distinguish between equity shares and preference shares.
Distinguish Between
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Solution
| Basis of Difference | Equity’ Shares | Preference Shares |
| Definition | Shares who do not enjoy any preference as regards payment of dividend and repayment of capital. | Shares that enjoy preference as regards payment of dividend and repayment of capital. |
| Why chosen | Voting rights only possible with equity shares. | With preference shares investors enjoy: Liquidation preference Conversion(1:1. 1:0.5. l:2)can be decided upon the performance of the company. |
| Rate of Dividend | Fluctuating, depending on the availability of profits and recommendations made by the Board of Directors. | Fixed. |
| Payment of Dividend | No priority. | Enjoy priority. |
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