Different types of shares
There are two types of shares.
1. Equity shares
2. Preference shares
1. Equity shares: We also know equity shares as common stock . These shares have voting rights. Equity share may be a main source of finance for any company giving investors the right to vote, share market profits and claim on assets.
We know a share that's not a preference share as equity share. It doesn’t offer a fixed rate of return. They don’t get a fixed rate of dividends. It entitles the entire of the profit of a corporation to these shareholders, only after paying a fixed dividend to preference shareholders.
Features of equity shares: This type of shares are permanent. This type of shareholder can bear high risk.Equity shareholder can transferable. The equity shareholders are the actual owner of the company. the company will pay appropriation profit for the shareholders. They did not have any fixed dividends. This type of shareholders have voting rights when company will taking decisions. They do not create any obligations to pay dividend. If only equity share are issue, the company cannot take advantage of trading on equity. During prospers period, higher dividends need to be paid to lead to are within the value of shares within the market, and it results in speculation. Investors who desire to invest in safe securities with a fixed income haven't any attraction for such shares. They have different method of calculating equity shares.
2.Preference shares: Preference share have some particular priority and rights in the company. The company first pay dividend for these type of shareholder and then they pay dividend to equity shares. the company will return all capital and dividend to preference shareholders. They do not have voting in the company decisions. but they some chances when the company will not pay any dividend for two year or more than on cumulative preference shares and four and more is called non-cumulative preference shares types. It is a long-term source of finance. They will pay dividend for preference shareholders higher than the debenture interest. The preference dividends tax in India is not tax-deductible expenditure. Preference shareholders have the preferential right for repayment of capital just in case of the winding -up of the corporate. Preference shareholders also enjoy a preferential right to receive the dividend. Preference shareholders did not get any extra dividend from the company when the company will huge profit, this form finance less attractive. To know hoe to calculate the preference shareholder and they different methods.
They have different classifications of equity shares and preference shares.
