What is Preference Share?
It is the shares, which have preferential right to get dividend and get back the initial investment at the time of winding up the company. Preference shareholders are eligible to get fixed rate of dividend and they do not have voting right.
Preference share may be classified into major types
Cumulative Preference share: cumulative preference share have right to claim dividends for those years which have no profit. If the company is unable to earn profit in any one or more years, these shares are unable to get any dividend but they have right to get comparative dividend for the previous years if the company earned profit.
Non-Cumulative Preference share: Non-Cumulative preference share have no right to earn dividends for those years which have no profit. They are eligible to get only when company earn profit, otherwise they cannot claim for dividend.
Redeemable Preference share: When preference share have fixed maturity period it become redeemable preference share.
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