Difference between Preference shares and Equity shares class 12
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Distinction between Preference Shares and Equity Shares (Class 12)
Preference Shares vs Equity Shares
| Basis of Distinction | Preference Shares | Equity Shares |
| Rate of Dividend | Preference shares are paid dividends at a fixed rate. | The rate of dividend on equity shares is not fixed. It may vary from year to year depending upon the availability of profits. |
| Arrears of Dividend | If the dividend is not paid on these shares in any year, the arrears of the dividend may accumulate. | In the case of equity shares, dividends can not accumulate. |
| Preferential right as to the payment of dividend | They have a right to receive dividends before any dividend is paid on equity shares. | Payment of dividend on equity shares is made after the payment of preference dividend. |
| Preferential right as to the payment of capital | They have a right to return capital in the case of winding up before any capital is returned to equity shareholders. | Equity share capital is paid only when preference share capital is paid out fully. |
| Voting rights | Preference shareholders do not have any voting rights. | Equity shareholders enjoy voting rights. |
| Right to participate in management | They do not have a right to participate in the management of the company. | They have the full right to participate in the management of the company. |
