Ordinary Shares and Preference Shares

Money and capital marketing

Ordinary and preference shares
Ordinary shares and preference shares compare and contrast
Ordinary shares are the shares in the company that are owned by the individuals who
have the right to give vote at the time of meeting of the company but Preference shares are
known as preferred stock (Law, 2016). These shares consist of the overall stock of the company
with the dividend which is given to the shareholders. Ordinary shares have the shares that
represent the ownership of equity in the company and also have the proportion in relation to the
ordinary shareholders. It is done on the basis of the ownership percentage in the company
(Gitman, Juchau & Flanagan, 2015).
In ordinary shares the shareholders receive the dividends only after the preference
shareholders; the first priority is given to the preference shareholders. But in case of preference
shares, if the company gets bankrupt, then in this case the shareholders who have the preferred
stock are paid from the overall assets of the company (Briston, 2017).
Basis Ordinary shares Preference shares
 Rate of dividend Variable rate of dividend Fixed rate is received as a
dividend.
 Period of dividend
received
Dividend is offered after the
payment of preference
shareholders.
Dividend is received on first
priority and it is before the
ordinary shareholders.
 Type of shares These shares can be known as
the management shares.
These shares can be basic,
cumulative or it can also be
redeemable preference.
 Risk High risk Low risk
 Voting rights Voting rights at annual general
meetings.
No voting rights
 Equity Can be considered as equity. In this the equity is not owned.
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Ordinary and preference shares
References
Briston, R. J. (2017). The stock exchange and investment analysis. Routledge.
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson
Higher Education AU.
Law, J. (Ed.). (2016). A dictionary of business and management. Oxford University Press.
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