Question

Discuss some characteristics and features of ordinary and preference shares? Shed some light on statement "preferences shares are referred to as hybrid security'?

Answer 1

Characteristics of Ordinary Shares.

a) Share maturity date is not specified.

b) The owner of the shares in a specific company receive dividends after management has declared it.

c) The investor has right to vote in a company.

d) If liquidations occurs in a company, the investor is paid after all liabilities are met.

Characteristics of preferences shares.

a) Maturity redemption date is specified.

b) The owner of the shares has not voting rights in a company.

c) Dividends are paid to the investor upon the agreed rate when issuing.

d) If liquidation occurs in a company, payment are mare to preference shareholders before the payment for ordinary shareholders are made.

The characteristics of shares are common in stock and debts in which bonds represent.