VIDYA BHARTI EDUCATIONAL INSTITUTIONS

shares http://vidyabharti.in/

DEFINITIONA part or portion of a larger amount which is divided among a number of people, or to which a number of people contribute.NATURE OF SHARESThe shares of company are movable property and are transferable in the manner provided in the Articles of Association. A share is undoubtedly a movable property in the same way in which a bale of cloth or a bag of wheat is a movable property. Such commodities are not brought in to existence by legislation but a share in a company belongs to a totally different category of property. It is incorporeal in nature and it consists merely of a bundle of rights and obligations.

TYPES OF SHARES

1.Equity Shares2.Preference Shares a. Cumulative Preference Shares b. Non-Cumulative Preference

Shares c. Participating Preference Shares d. Non-Participating Preference

Shares e. Redeemable Preference Shares f. Irredeemable Preference Shares g. Convertible Preference Shares h. Non-Convertible Preference

Shares

DEFINITION OF EQUITY SHARES

Equity shares are the main source of finance of a firm. It is issued to the general public. Equity share holders do not enjoy any preferential rights with regard to repayment of capital and dividend. They are entitled to residual income of the company, but they enjoy the right to control the affairs of the business and all the shareholders collectively are the owners of the company.

ADVANTAGES • Easily sold• Higher rate dividend• Right to control the management

DISADVANTAGES• Equity shareholders get dividend only if there is profit• Equity shareholders are scattered and unorganized, and hence

they are unable to exercise any effective control over the affairs of the company.

• Equity shareholders bear the highest degree of risk of the company.

• Issue of fresh shares reduces the earnings of existing shareholders.

EQUITY SHARES….ADVANTAGES V/S DISADVANTAGES

DEFINITION OF PREFERENCE SHARES

• Preference shares are those shares which carry certain special or priority rights. Firstly, dividend at a fixed rate is payable on these shares before any dividend is paid on equity shares.

• Secondly, at the time of winding up of the company, capital is repaid to preference shareholders prior to the return of equity capital. Preference shares do not carry voting rights. However, holders of preference shares may claim voting rights if the dividends are not paid for two years or more on cumulative preference shares and three years or more on non-cumulative preference shares.

• Preference shares have the characteristics of both equity shares and debentures. Like equity shares, dividend on preference shares is payable only when there are profits and at the discretion of the Board of Directors.

• Preference shares are similar to debentures in the sense that the rate of dividend is fixed and preference shareholders do not generally enjoy voting rights. Therefore, preference shares are a hybrid form of financing.

ADVANTAGES DISADVANTAGES1. Appeal to Cautious Investors 1. Fixed

Obligation2. No Obligation for Dividends 2. Limited

Appeal3. No Interference 3. Low

Return4. Trading on Equity 4. No Voting

Rights5. No Charge on Assets 5. Fear of

Redemption6. Flexibility7. Variety

ADVANTAGES V/S DISADVANTAGES

PREFERENCE SHARES…

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