Question

Glory, a well-established company is listed on the stock exchange. Ramesh and Suresh want to invest in the company. While Ramesh decides to buy equity shares, Suresh wants to buy preference shares in the company.

Justify the decisions made by Ramesh and Suresh.

Answer 1

Ramesh decides to buy equity shares.

Following are the benefits of equity shares:

1. No burden on earnings
2. Permanent capital
3. Higher returns
4. No charge on assets

Suresh decided to buy preference shares.

Benefits include:

1. No charge on assets
2. No burden on profit
3. Flexibility
4. Trading on equity