Distinguish between Equity Share & Preference Share

 Distinguish between Equity Share & Preference Share

Here is a comparison of equity shares and preference shares:

Feature	Equity Shares	Preference Shares
Dividend	No guaranteed dividend. Dividends are paid out of profits at the discretion of the board of directors.	Fixed or predetermined dividend, regardless of the company's profits.
Voting rights	Yes. Equity shareholders have the right to vote on company matters, such as the election of directors and approval of major transactions.	No. Preference shareholders typically do not have voting rights.
Claim on assets	Residual claim on assets. In the event of liquidation, equity shareholders are entitled to any remaining assets after all other creditors and debt holders have been paid.	Preferential claim on assets. Preference shareholders are entitled to receive their investment back before equity shareholders in the event of liquidation.
Risk	Higher risk. Equity shares are more volatile and subject to the fortunes of the company.	Lower risk. Preference shares offer a more stable income stream and are less volatile than equity shares.
Suitability for investors	Investors seeking capital appreciation and voting rights.	Investors seeking a steady income stream and capital preservation.