Study the following case/situation and express your opinion.
Mr. Rohit, an individual investor, invests his own funds in the securities. He depends on investment income and does not want to take any risk. He is interested in definite rate of income and safety of principal.
- Name the type of security that Mr. Rohit will opt for.
- What does he receive as return on his investment?
- The return on investment which he receives is fixed or fluctuating?
- Mr. Rohit, an individual investor, invests his own funds in the securities. He depends on investment income and does not want to take any risk. So according to me, he should opt for preference shares.
- He will receive the dividend as a return on investment. The dividend received by preference shareholders is fixed. They get dividends prior to equity shareholders.
- Return on investment on preference shares is always fixed, regular, and steady. But they don't have the right to participate in the management of the company. Only equity shareholder has the rights as they are the real owner of the company.