what is equity shares and its merits and demerits ?
what is preference shares and merits and demerits?
what is debentures and its merits and demerits ?
In response to first part of your query, As per Section 85 (2) of Companies Act 1956, equity share is a share that is not a preference share. It does not posses any preferential right of payment of dividend or repayment of capital. The rate of dividend is not fixed on equity shares and varies from year to year. The amount of dividend on equity shares depends on the amount of profit available for distribution after paying dividend to the preference shareholders. The equity shareholders have the voting rights and also control the affairs of a company.
For merits of equity shares, follow the below mentioned link.
https://www.meritnation.com/ask-answer/question/what-are-the-advantage-of-issuing-equity-shares-to-raise-lon/academics/6240568
For demerits of equity shares, follow the below mentioned link.
https://www.meritnation.com/ask-answer/question/demerit-of-equity-shares-dilution-of-control-issue-of-addit/academics/6569653
In response to second part of your query, the Section 85 (1 ) of the Companies Act, 1956 defines Preferences shares to be featured by the following rights.Preference Shares entitle its holder the right to receive dividend at a fixed rate or of a fixed amount.Preference Shares entitle its holder the preferential right to receive repayment of capital invested by them before their equity counterparts at the time of winding up of the company.
The following are the merits of preference shares:
i. Secured returns: The rate of return on preference shares is fixed; thus, the risk of uncertainty is less.
ii. No dilution of control: Preferential shareholders do not have any voting rights in the company.
Following are the demerits of preference shares as a source of long-term finance:
i. Varying dividends: The dividend payment to preference shareholders is dependent on the profits of the company.
ii. Non-tax-deductible asset: Unlike the return on debentures or the interest on loans, the return on preference shares is not tax-deductible.
Due to paucity of time it would not be possible for us to solve all your queries. We are providing solution to two of your queries. Try solving the rest of the questions yourself and if you face any difficulty then do get back to us.
I want to make an humble request to you. As here in this thread, you have asked three questions altogether. This makes our indexing mechanism inefficient. Thus, we hereby request you to ask a single question in a single thread. This will be highly beneficial for our other students to go through your questions. Please abide by this from the next time on.
For merits of equity shares, follow the below mentioned link.
https://www.meritnation.com/ask-answer/question/what-are-the-advantage-of-issuing-equity-shares-to-raise-lon/academics/6240568
For demerits of equity shares, follow the below mentioned link.
https://www.meritnation.com/ask-answer/question/demerit-of-equity-shares-dilution-of-control-issue-of-addit/academics/6569653
In response to second part of your query, the Section 85 (1 ) of the Companies Act, 1956 defines Preferences shares to be featured by the following rights.Preference Shares entitle its holder the right to receive dividend at a fixed rate or of a fixed amount.Preference Shares entitle its holder the preferential right to receive repayment of capital invested by them before their equity counterparts at the time of winding up of the company.
The following are the merits of preference shares:
i. Secured returns: The rate of return on preference shares is fixed; thus, the risk of uncertainty is less.
ii. No dilution of control: Preferential shareholders do not have any voting rights in the company.
Following are the demerits of preference shares as a source of long-term finance:
i. Varying dividends: The dividend payment to preference shareholders is dependent on the profits of the company.
ii. Non-tax-deductible asset: Unlike the return on debentures or the interest on loans, the return on preference shares is not tax-deductible.
Due to paucity of time it would not be possible for us to solve all your queries. We are providing solution to two of your queries. Try solving the rest of the questions yourself and if you face any difficulty then do get back to us.
I want to make an humble request to you. As here in this thread, you have asked three questions altogether. This makes our indexing mechanism inefficient. Thus, we hereby request you to ask a single question in a single thread. This will be highly beneficial for our other students to go through your questions. Please abide by this from the next time on.