Distinguish between Ordinary Shares and Preference Shares.
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Ordinary shares and preference shares represent different types of equity ownership in a company, each with distinct characteristics and rights.
Ordinary Shares:
Ownership and Voting Rights:
Dividend Payment:
Risk and Returns:
Capital Appreciation:
Residual Claim:
Preference Shares:
Fixed Dividends:
No Voting Rights:
Preference in Liquidation:
Less Capital Appreciation:
Lower Risk:
In summary, ordinary shares represent ownership with voting rights, variable dividends, and a higher risk-return profile. Preference shares, on the other hand, offer fixed dividends, priority in liquidation, and a more conservative risk-return profile with limited voting rights. Investors choose between ordinary and preference shares based on their investment goals, risk tolerance, and desired level of involvement in company decisions.