Basis of Difference | Equity Shares | Preferred Shares |
Definition | Equity shares are also known as ordinary shares. are shares that the companies issues for raising capital which is then used for the development of the organization. | Preference shares or preferred stocks are shares that provide the holders a preference over the equity shares. The preferred shareholders have the right to ask for their money from the company’s assets. |
Dividend | The shareholders do not have the right to receive dividends. The rate of dividends can fluctuate from time to time. | The shareholders are qualified to receive dividends whenever the company runs in a profit. The rate of dividend is fixed. |
Convertibility | The equity shares can be converted into preference shares | The preference shares can be converted to equity shares |
Voting rights | The equity shareholders have the right to vote and can claim the assets of the company. They play a crucial part in the decision-making of the institution. | The preference shareholders do not have the right to vote and for the same reason, they do not have the power to control or influence the organization’s decisions. |
Types | These stocks are also considered ordinary stocks so they do not have any types. | Preference shares are of different types namely, Convertible and non-convertible, Cumulative and non-cumulative, etc. |
Liquidation | Equity shareholders have the right over the company’s assets once they complete all the pending payments. | The preferred shareholders have the first right to receive the payment after paying all the company’s creditors. |
Participation rights | They have the right and are responsible for managing the company | They do not have participation right over the company and hence do not have any responsibility. |
Type of Investors | These shares are more suitable for risk-taking investors | These shares are suitable for investors who are not willing to take many risks. |