Money and Capital Market Analysis: Shares Overview and Comparison

This presentation provides a comprehensive analysis of money and capital markets, focusing on the distinctions between ordinary and preference shares. It begins by defining both share types, highlighting their roles in corporate finance and the distribution of profits. The presentation then delves into a detailed comparison, contrasting ordinary and preference shares across several key aspects, including dividend payments, capital repayment priority, rate of dividend, voting rights, and convertibility. Furthermore, it explores the similarities between these share types, such as their role in forming share capital and the challenges faced by shareholders. The presentation also discusses various types of preference shares, such as redeemable, convertible, cumulative, and participating shares, and different types of equity shares. Finally, it includes a practical example using Woolworths' financial data to illustrate key concepts and concludes with a summary of the essential takeaways for investors to understand the implications of choosing between ordinary and preference shares.

MONEY AND
CAPITAL MARKET
ANALYSIS

Introduction
■ Shares are the units of personal owner interest in financial assets
that would include distribution of profit in corporations and returns
from these instruments are in form of dividend.
■ The two major shares are preferred shares and ordinary shares also
known as equity shares.

Difference between ordinary and
preference share
COMPARISAON BASIS ORDINARY SHARES PREFERENCE SHARES
Define Ordinary shares are the equity shares
of the firm that represents the part of
ownership of the shareholder in the
organisation.
Preference shares are the shares that
have the desired rights related to the
matter of repayment of capital and
payment of dividend.
Payment of dividend Ordinary shareholders receive the
payment after paying all the liabilities
of the organisation.
Preference shareholder also gets the
Urgency in payment of dividend as
compared to the equity shareholders.
Settlement of capital It was stated that equity shares are
repaid at the end during the time of
winding up of enterprise.
The preference of repayment is given
to these shareholders before equity
sharesholders.
Rate of dividend In ordinary share, rate of dividend
fluctuates.
The rate of dividend is fixed in
preference shareholders.

Difference between ordinary and
preference share
Rate of dividend In ordinary share, rate of dividend
fluctuates.
The rate of dividend is fixed in
preference shareholders.
Redemption Shares are not redeemed in equity
shares.
Shares can be redeemed in preference
shares.
Rights of voting Those who have equity shares, their
vote are being considered
There are no general voting rights to
preference shareholders.
Interchangeability Equity shares cannot be convert. Preference shares can easily be
changed into the equity shares.
Arrears of Dividend The equity shareholders do not have
the right to get the right of arrears
related to the dividend of past years.
These shareholders usually get the
arrears of dividend in align with
present year dividend, if not paid in the
last previous year, excluding in the
case of non-cumulative preference

Similarities between ordinary
and preference share
■ Equity and preference share also have various similarities.
The first similarity between both the shares is that both
the finance earns the dividend. Equity shareholders
receive the dividend after the preference shareholders,
debenture holders and equity shareholders.
■ The second similarity is that both these shareholders form
the share capital by paying some amount in the form of
monetary value. Apart from the difference in terms and
condition, they pay the share capital

Similarities between ordinary
and preference share
■ Equity, as well as preference shareholders, face some kind
of difficulty in raising the amount. It is because every
company has some kind of formalities that these
shareholders are required to comply.
■ As equity shareholders receive after paying all the
dividend to other shareholders and creditors. For the
preference shareholders, it leads to a higher cost as
compared to the debt for issuing. Equity, as well as
preference shareholders, have the long-term finance.

Types of preference shares v/s
equity shares
■ The major types of preference
share include –
 Redeemable and Irredeemable
Preference Shares.
 Convertible and Non-Convertible
Preference Shares.
 Redeemable and Irredeemable
Preference Shares.
 Participating and Non-
Participating Preference Shares.
 Cumulative and Non-Cumulative
Preference Share

Types of preference shares v/s
equity shares
■ In equity shares, which are irredeemable in nature, have class of
shares depending upon some aspects or things.
■ Paid up capital is one of the key things for the classification, which is
subscribed capital’s part and that the investor is liable to pay.
■ There are some other types to the equity shares that are right
shares.

Types of preference shares v/s
equity shares
■ Another type is bonus shares, which includes the issue of shares by
the corporations, are in form of dividend to the shareholders and
these are said to be bonus shares.
■ The major advantage of bonus shares includes capital gain, limited
liability, market fluctuations, and capital gain.

Example
■ Woolworths is one of the grand retail companies in Australia.
Considering the financial facts and figure of the company,
Woolworths group limited per share data for 2016 to 2018 are
presented as below
Year
to
Jun Sales
Cash
flow
Earning
s
Dividend
s Franking
Book
Value
Averag
e
Annual
P/E
Relativ
e P/E
Shareholde
r Return
2018 $43.50 224.8 ¢ 123.2 ¢ 93 ¢ 100% $8.01 21.8% 137.5% 23.9%
2017 $43.20 242.5 ¢ 110.5 ¢ 84 ¢ 100% $7.39 22.2% 138.6% 25.6%
2016 $46.10 186.6 ¢ 215.2 ¢ 77 ¢ 100% $6.62 11.2% 66.6% -18.7%
Total
Debt Interest
Long Term
Debt
Per cent
Debt
Preferred
Stock
Share
Equity
Per cent
Equity
$2,803,0
00
$154,00
0
$2,199,000 17% $0.00 $10,481,00
0
83%

Conclusion
Considering all, It can be said that investors must understand the difference
between the ordinary as well as preference shares. Shares are the units of
personal owner interest in financial assets that would include distribution of
profit in corporations and returns from these instruments are in form of
dividend.
The key basis on which the equity and preference shares are compared and
contrast included the meaning, payment of dividend, repayment of capital
amount, share redemption, voting rights, rate of dividend, arrears of dividend,
and convertibility of shares

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