FINC20019 Presentation: Ordinary Shares vs. Preference Shares

This presentation offers a comprehensive comparison between ordinary and preference shares. It highlights key differences, including voting rights, dividend structures (fixed vs. variable rates), equity ownership, and risk profiles. The analysis covers the priority of dividend payments, the impact of bankruptcy on shareholders, and the types of shares available, such as management, basic, cumulative, and redeemable shares. The presentation references several academic sources, including works by Gitman, Law, Briston, Pilbeam, and Keynes, to support the comparison and provide a solid understanding of the financial instruments. The comparison is critical for investors to make informed decisions about equity investments.

COMPARE AND CONTRAST
ORDINARY SHARES VERSUS
PREFERENCE SHARES

ORDINARY SHARES
 Right to give vote only in meetings.
 Represent ownership of equity.
 Done by Ownership percentage.
 Receive dividend after preference
shareholders.
 first priority for preference
shareholders.

PREFERENCE SHARES
 Known as “Preferred Stock”.
 Dividend offered to shareholders.
 In case of bankruptcy: shareholders
are paid from the assets of the company.
 Right of capital repaid.
 Profits receive before the ordinary shareholders.

COMPARE AND CONTRAST ORDINARY SHARES
VERSUS PREFERENCE SHARES
 Rate of dividend
a.) Ordinary shares: variable rate
b.) preference shares: fixed rate
 By owning preference shares does
not guarantee the payment dividend.

COMPARE AND CONTRAST ORDINARY SHARES
VERSUS PREFERENCE SHARES
 Period of dividend received
a.) ordinary shares: after
payment of preference shares .
b.) preference shares: payment
on first priority.

COMPARE AND CONTRAST ORDINARY SHARES
VERSUS PREFERENCE SHARES
 Types of shares
a.) Ordinary shares: Management
shares.
b.) preference shares: Basic,
cumulative and redeemable shares.
 Risk
a.) ordinary shares: High
b.) preference shares: Low

COMPARE AND CONTRAST ORDINARY SHARES
VERSUS PREFERENCE SHARES
 Voting rights
a.) Ordinary shares: Voting rights
at annual general meetings.
b.) preference shares: No voting rights.
 Equity
a.) Ordinary shares: Equity
b.) preference shares: Does not own equity.

REFERENCES
 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.
 Briston, R. J. (2017). The stock exchange and investment
analysis. Routledge.
 Pilbeam, K. (2018). Finance & financial markets. Macmillan
International Higher Education.
 Keynes, J. M. (2018). A tract on monetary reform. Pickle
Partners Publishing.