What Are Ordinary, Preference And Preference Cumulative Share?

1. Ordinary : It is the most common type which companies issue. They are ordinary or common shares in that they have the residual value for the shareholders. If a company is wound up, first all liabilities must be paid off . If some amount is left over it will be distributed to the shareholders. And in case no amount is left, they will get nothing. The profit (divided) is not compulsory to be paid to the shareholder its rate is not fixed either . The rate and payment of dividend depends on the discretion of the board of directors. In short, the ordinary shareholder has residual to company assets and profits.

2. Preference Shares-Such share enjoy preemptive right to the profit and assets of the company. If a company issue both the types the preference share will be preferred to ordinary share in the distribution of profit and assets after the preference share.

3. Preference Cumulative Share : Such share must get dividend at the rate already fixed at the time of issue. If a company finds it self unable to pay such a dividend for a particular financial years it would be accumulated to that of the next year. Until paid the dividend would go on accumulating together. This accumulating nature makes it preference cumulative share.