Investment Avenues

-Ranpreet kaur

preference shares
Meaning Shares which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. Definition Preference share can be defined as those shares that carry preferential right with regard to dividend as well as repayment of capital in case of winding up of the company.

Features/Advantages
Preferential rights in respect of Dividend at fixed

amount or at fixed rate preferential right in regard to payment of capital on winding up /liquidation. Preference over equity shareholders at the time of payment of dividend Do not have voting rights the investor has a greater claim on the company's assets than common stockholders.

limitations
Share in the profit

Voting rights
Not traded on exchanges No added benefit as compared to equity

shareholders

Types of Preference Shares

Cumulative Non cumulative Preference shares Convertible Non Convertible Preference shares Participating Non Participating Preference shares

Redeemable Non Redeemable Preference shares

Cumulative and Non cumulative Preference shares

Cumulative preference shares give the right to the preference shareholders to receive arrears of dividend which were not paid in previous years due to company making loss.

While Non- cumulative Preference shareholders do not have right like Cumulative preference shareholders and therefore they cannot demand any arrears of dividend which were not paid during previous years by the company.

Convertible and Non Convertible Preference shares

Convertible Preference shares can be converted into equity shares if preference shareholder decides to do so while Non Convertible Preference shares does not have any such right.

Participating and Non Participating Preference shares

Participating Preference shareholders have the right to receive any remaining profit which is left after payment of dividend to the equity shareholders, while Non Participating Preference shareholders do not have such rights.

Redeemable and Non Redeemable Preference shares

Redeemable Preference shares are those shares which have to be repaid by the company after a fixed period of time from the date of issue of such shares
while Non Redeemable Preference shares cannot be redeemed repaid by the company except on winding up of the company.

Equity Shares
An equity share, commonly referred to as ordinary share also represents the form of fractional ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture.

Features/Advantages
Owner of the Company

Share in the profit

Voting rights Traded on exchanges Added benefit(right Shares)

Types of Equity Shares

On the basis of issue Warrants

Warrants are a type of equity that allows the holder to purchase stock in a company at a time in the future but at a price determined at the time the warrant is sold. Essentially, the warrant allows an individual to buy valuable stock for less than the market price.
Rights Issue/ Rights Shares: The issue of new securities to existing

shareholders at a ratio to those already held.

Bonus Shares: Shares issued by the companies to their shareholders

free of cost by capitalization of accumulated reserves from the profits earned in the earlier years.

 Flotation

Flotation is also referred to as an initial public offering (IPO) and is the process by which a company sells its shares to the public, usually for the first time. In essence, it refers to a movement of a large piece of a company's stock.
Private Offering

A private offering is stock unavailable on the public market. The actual stocks sold are basic common stocks, with all the rights and privileges typically afforded, but often stocks bought through a private offering may not be resold for a specified period of time.

On the basis of market

Blue Ship Shares

Income Shares
Growth Shares Cyclical Shares Speculative Shares

Difference between equity and preference Shares

Rate of Dividend

Arrears of dividend
Redemption Payment of dividend Voting rights