Fundamentals of Financial Management, Third Edition

SUMMARY

Corporate securities—shares and debentures—are the traditional sources of funds for a company. The shares are either equity or preference shares. Equity shareholders are the last claimants for dividend and for a share of the company’s assets after liquidation. They do, however, possess voting rights. They also have pre-emptive rights to buy new issues, if any.

Preference shareholders have a prior claim on dividend and assets as compared to the equity shareholders. The rate of dividend they receive is fixed. They have voting powers only in special cases. In some cases, preference shares are redeemed. In other cases, the holders of preference shares additionally participate in dividend along with the equity shareholders. In all, both the ...