Difference between Preference shares and Equity shares class 12

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Looking for What is the difference between preference shares and equity shares as per the syllabus of class 12 CBSE, ISC, and state Board.

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Distinction between Preference Shares and Equity Shares (Class 12)

Preference Shares vs Equity Shares

Basis of DistinctionPreference SharesEquity Shares
Rate of DividendPreference 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 DividendIf 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 dividendThey 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 capitalThey 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 rightsPreference shareholders do not have any voting rights.Equity shareholders enjoy voting rights.
Right to participate in managementThey 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.
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