Shares
v Share is a subdivision of the capital of the company
v Each share has a distinct number
v Each share is given a face value which is paid by the shareholder
v There are two main types of shares
Difference between Preference Shares and Ordinary Shares
Preference Shares
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Ordinary Shares
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v Dividend is paid first
v At the time of winding up, share capital will be returned before that of ordinary shares
v It gets a fixed rate of dividend
v It gives no voting right
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v Dividend is paid last
v At the time of winding up, share capital will be returned after that of preference shares
v No fixed rate of dividend
v It gives voting right
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Debentures
Debenture is a document which acknowledges a loan to the company. It is a part of the loan capital of the company. Debenture carries a fixed rate of interest which must be paid whether the company makes profit or not.
Difference between Shares and Debentures
Shares
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Debentures
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v Shareholders are owners of the company
v Ordinary shareholders get no fixed rate
v Its reward is based on company profits
v Ordinary shareholders have voting rights
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v Debenture holders are not the owners
v It carries a fixed rate of interest
v It is paid irrespective of profitability
v Debenture holders have no voting right
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