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CA Yugesh
Chartered Accountant... • 4m
🌟 The VIP Pass of the Investment World: Unraveling PREFERENCE SHARES In the bustling world of investments, these shares are like the golden tickets that come with some extraordinary perks. In simple words, Companies need investments but may not want to dilute ownership (% of holdings in the company) or commit to guaranteed payments like loans. To address this, an instrument called preference shares was introduced. Preference shareholders have a claim on the company for the amount they invested, along with a priority in receiving dividends (if declared), but they typically don’t participate in ownership or decision-making. In simpler terms, they are Investors who lend money with priority in repayment and dividends, but without guaranteed interest or control. But why would a company issue preference shares instead of equity shares? For Company, ✅ No Dilution of Ownership. ✅ Flexibility in Capital Structure ✅ No monthly Interest Commitments For Investors, ✅First in line for Dividend payout before Ordinary Shareholders ✅Priority during company liquidation Takeaway: Preferential Shares aren't just a financial instrument; they're a strategic tool that can transform how businesses raise capital and how investors participate in growth. This is 🚀 Day 2 of our 100-day journey into demystifying finance for entrepreneurs. Questions brewing in your mind? Drop them in the comments! 💡 Your turn! What financial term has always puzzled you? Drop a comment below, and let's learn together!
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