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What types of shares can a company issue to raise long term funds?
A company can issue two types of shares to raise long term funds:
- Equity Shares are also known as ordinary shares as they are ordinary in the course of company’s business. Equity shareholders get dividend out of the profits earned by the company. Higher the profits, higher will be dividend vice-versa. But they don’t get first preference regarding payment of dividend and repayment of capital in the case of winding up of the company.
- Preference Shares are the shares which get first preference over equity shares as regards to payment of dividend and repayment of capital. Capital of preference shareholders is paid before equity shareholders in case of winding up of the company. Preference share holders don’t have voting powers. They can only vote when matters affect their own interest
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