Difference between Preference shares and Equity shares

All shareholders may have some idea or knowledge of what a share is. The definition can be found in the word itself. Are you aware that each shareholder is actually part-owner of the company?Every company has its own capital structure.

• Share capital
• Debt funds
• Surplus and Reserves

There are many types of share:

• Equity share capital
• Preference share capital, etc.

Let's now understand and learn the basics of equity and preference shares.

Preference shares and equity shares

They are two sides to a coin. Each has its advantages and disadvantages. While dividends of preference shares are fixed, the performance of the company is a major determinant of their equity dividends.

Equity market is high-risk. Therefore, equity shareholders are the true bearers of the company as they have a residual part in liquidation. Preference shares have higher earnings claims and a fixed dividend rate.

Let's look at the difference between equity shares and preference shares. Preference shares
A company issues

• Equity share capital Rs. 10 crore, 1 million shares of Rs. 10 per.
• Preference share capital Rs. 1 crore, 10 000 shares of Rs. 10 lakh shares of Rs.

Preference shareholders will have preferred rights over equity shareholders.

There is a difference between preference share and equity share

Investors need to be knowledgeable about all forms of investment because there are high risks. The investment golden rule is to buy shares or stocks when they are low and then sell them when they are high. Long-term investments offer a longer return. The ability to invest can lead to huge profits.