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Question
Ms. Rubina, a first-time investor, does not understand the difference between securities with voting rights and securities without voting rights.
Give any five differences between the two types of securities to help her understand the difference.
Solution
The securities with voting rights are equity shares and the securities without voting rights are preference shares.
These are some of the differences between the two for Ms. Rubina's understanding:
| S. No. | Equity shares | Preference shares |
| 1. | The level of risk is significant due to the investor's reliance on the company's success or failure. | The fixed dividend rate ensures consistent and stable income, reducing risk significantly. |
| 2. | Dividend rates typically vary based on the company's profit. | Rate of dividend is fixed. |
| 3. | Full voting rights. | Voting rights are limited when dividends are unpaid for a specific period or when concerns affecting them are engaged. |
| 4. | Not redeemable during the life time of the company. | Redeemable during life time of the company. |
| 5. | Not convertible into preference share. | May be convertible into equity share. |
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