Equity Shares Vs. Preference Shares Vs. debentures

What are Equity Shares?

Equity shares are long-term financing sources for any company. These shares are issued to the general public and are non-redeemable in nature. Investors in such shares hold the right to vote, share profits and claim assets of a company. The value in case of equity shares can be expressed in various terms like per value, face value, book value and so on.

What Are Preference Shares?

Preference shares,  more commonly referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, preferred stockholders are entitled to be paid from company assets before common stockholders. Most preference shares have a fixed dividend, while common stocks generally do not. Preferred stock shareholders also typically do not hold any voting rights, but common shareholders usually do.

What is a Debenture?

Debenture,  is used to issue the loan by government and companies. The loan is issued at the fixed interest depending upon the reputation of the companies. When companies need to borrow some money to expand themselves they take the help of debentures.

Difference Between Equity Shares and Preference Shares?

  •  Equity Shares are the shares that carry voting rights and the rate of dividend also fluctuate every year as it depends on the amount of profit available to the company. On the other hand, Preference Shares are the shares that do not carry voting rights in the company as well as the amount of dividend is also fixed.

  • One of the major difference between equity shares and preference shares is that the dividend on preference shares is cumulative in nature, whereas the equity share dividend does not cumulates, even if not paid for several years. 

Comparison Chart

Meaning Equity shares
Equity shares are the ordinary shares of the company representing the part ownership of the shareholder in the company.

Meaning Preference shares
Preference sharesare the shares that carry preferential rights on the matters of payment of dividend and repayment of capital.

Payment of dividend 
Equity shares

The dividend is paid after the payment of all liabilities.

Payment of dividend Preference shares

Priority in payment of dividend over equity shareholders.

Rate of dividend 
Equity shares


Rate of dividend Preference shares


Voting rights Equity shares

Equity shares carry voting rights.

Voting rights Preference shares

Normally, preference shares do not carry voting rights. However, in special circumstances, they get voting rights.

Repayment of capital Equity shares

In the event of winding up of the company, equity shares are repaid at the end.

Repayment of capital Preference shares

In the event of winding up of the company, preference shares are repaid before equity shares.

Equity Shares Vs. debentures

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