Shares

Shares are units of ownership in a company’s capital or as a unit of equity.

A company issues shares to the public for raising funds for its expansion. Shareholders are the owners of the company. Shareholders get the right to dividends, which the company pays out of profits earned by the company.

Shares can be broadly classified into two types.

Preference Shares

Preference Shares are issued by the companies seeking to raise capital. They combine the features of debt and equity.

Preference Shareholders

•  Preference Shareholders get preferential rights over other shareholders.
•  Preference Shareholders gets

· Dividend on priority at the time of dividend distribution

· Repayment of capital priority given at the time of liquidation

Types of Preference Shares

Equity Shares

Equity shares are also known as ordinary shares or owner’s equity, and they are the significant sources of long-term financing.

Equity Shareholders

• Bear the highest risk, but the liability is limited to the amount of their investment.
• Have the right to vote on various company affairs but no preferential rights in holding.
• Dividends are paid out of profit in proportion but are not entitled to a fixed dividend. Dividends are paid only after payment to the preference shareholders. 
• Liquidation - Equity Shareholders does not have the right to claim dividends on income or assets at the time of the  company’s liquidation.

Equity shares are classified as