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Question
Distinguish between equity shares and preference shares.
Solution
| Basis of Difference | Equity’ Shares | Preference Shares |
| Definition | Shares who do not enjoy any preference as regards payment of dividend and repayment of capital. | Shares that enjoy preference as regards payment of dividend and repayment of capital. |
| Why chosen | Voting rights only possible with equity shares. | With preference shares investors enjoy: Liquidation preference Conversion(1:1. 1:0.5. l:2)can be decided upon the performance of the company. |
| Rate of Dividend | Fluctuating, depending on the availability of profits and recommendations made by the Board of Directors. | Fixed. |
| Payment of Dividend | No priority. | Enjoy priority. |
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Lennova Ltd. has authorised share capital of ₹ 1,00,00,000 divided into 1,00,000 Equity Shares of ₹ 100 each . It has existing issued and paid up capital of ₹ 25,00,000. It further issued to public 25,000 Equity Shares at a premium of 20% for subscription payable as under:
| On Application: | ₹ 30 |
| On Allotment: | ₹ 60 and |
| On Call: | Balance Amount. |
The issue was fully subscribed and allotment was made to all the applicants . The company did not make the call during the year.
Show share capital of the company in the Balance Sheet of the Company.
State, with reasons, whether the following statement is True or False
Handling demat shares is very time consuming.
Write any four features of equity shares.
What are preference shares?
Give any four types of Preferences shares.
