Q. Consider the following differences between equity and preference shares: - While preference share holders have no voting rights, equity shares come with voting rights
- While preference share holders are paid at fixed rate, equity share holders dividend depends on profit of the company
Which of the above statements is/are correct?
Answer:
Both 1 & 2
Notes: The preference shares are safer investments than the equity shares. In case the company is wound up and its assets (land, buildings, offices, machinery, furniture, etc) are being sold, the money that comes from this sale is given to the shareholders. Preference shareholders are given priority over equity shareholders.