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In today’s Store Management class, we will be learning about Forms of Shareholders
Forms of Shareholders
The term ‘shareholder’ is used to refer to any person, institution or company that has ownership of at least one share of a company’s stocks, also referred to as equity.
A shareholder is also known as stockholders, and as such are partial owners of a company and are entitled to a share in the profits that the said company generates.
Now, let’s take a look at the Forms of Shareholders
- Preference Shares
Preference shares are one of the financial instruments that a company uses to raise capital for their operations. They are the general exclusive share options that enable the shareholders of a company to get dividends before the equity shareholders when it gets announced. It also allows them to claim a special right to the dividends during the lifetime of the company, along with the option for claiming repayment of capital when the company winds up. Preference shares are seen as a hybrid security option simply because they represent the traits of both debt as well as equity investments. The capital that a company raises by issuing preference shares (to individuals and investors) is called preference share capital. The preference shareholders are also regarded as the owners of the company, like equity shareholders. The only difference, however, is that they do not have any voting rights.
- Ordinary Shares
Ordinary shares are a financial instrument that organizations use to raise capital for their short term as well as long term operations. The shareholders (both individuals and organizations) have the right to vote and participate in the management of the company as well. However, they get the returns on their shares after the preference shareholders and only if a company makes a profit. They also have the last right to claim the repayment of capital in case the company goes into liquidation. Ordinary shares represent equity investments. The capital that an organization manages to raise by issuing ordinary shares is known as equity share capital. Like the preference shareholders, the holders of ordinary shares are also the owners within the organization.
In summary, both preference and ordinary shares allow investors to become part owners of the company. Organizations also prefer to raise capital through them as compared to the debt instruments.
Who is a Shareholder?
Explain the meaning of Preference Shares
Explain what Ordinary Shares means and the entities entitled to them.
We hope you enjoyed today’s class. In our next class, we will be talking about Differences Between Debentures And Shares.
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