This document contains information about Dheeraj Agrawal's enrollment in a financial management course at Parul Institute of Management. It discusses various types of preference shares including cumulative vs non-cumulative, participating vs non-participating, convertible vs non-convertible, and redeemable vs non-redeemable shares. It outlines the key features and rights of each type of preference share from both a company and investor perspective. Formulas for calculating the cost of irredeemable and redeemable preference shares are also provided.

1. NAME: DHEERAJ AGRAWAL
DIV.: C
ROLL NO.: 11
ENROLL NO.: 147110592023
SUBJECT
FINANCIAL MANAGEMENT
PARUL INSTITUTE OF MANAGEMENT &
RESEARCH

2.  Preference shares are those which have preferential right
to the payment of dividend during the life-time of the
company and a preferential right to the return of capital
when the company is wound up.
 Preference shares also have a right to participate or in
part in excess profits left after been paid to equity
shares, or has a right to participate in the premium at
the time of redemption. But these shares do not carry
voting rights.

3. 1. Dividends.
2. Voting Rights.
3. Redeemable Or Callable Preference Shares.
4. Preemptive Right.
5. Claims.
6. Redemption.
7. Conversion.
8. Cumulative.

4.  Cumulative and Non cumulative.
 Participating and Non Participating.
 Convertible and Non Convertible.
 Redeemable and Non Redeemable.

5.  Holders of Cumulative preference shares are entitled to
recover the arrears of preference dividend before any dividend
is paid on equity shares.
 In the case of Non- cumulative Preference shares arrears of
dividend do not accumulate and hence, if dividend is to be
paid to equity shareholder in any year, dividend at a fixed rate
for only 1 year will have to be paid to preference shareholder
before equity dividend is paid.

6.  Participating Preference shareholders are not only entitle to
only fixed rate of dividend but have the right to receive any
surplus profit which remains after dividend has been paid at a
certain rate to equity shareholders.
 Non Participating Preference shareholders are entitle to only
fixed rate of dividend.

7.  Holder of Convertible Preference shares enjoy the right to get
preference share converted into equity shares according to the
terms of issue.
 Holder of Non Convertible Preference shares do not enjoy any
such right.

8.  Redeemable Preference shares are those preference shares
whose amount can be returned by the company to their holder
within the life time of the company subject to the terms of the
issue and fulfillment of certain legal conditions laid down in
the companies act.
 The amount of Non Redeemable Preference shares can be
returned only company is wound up.

9. 1. No Obligation for Dividends.
2. No Interference.
3. No Charge on Assets.
4. Flexibility.
5. Variety.

10.  COMPANIES POINT OF VIEW:
 Fixed Return.
 No Voting Right.
 Flexibility in Capital Structure.
 No Burden on Finance.
 No Charge on Assets.
 Widens Capital Market.

11.  INVESTORS POINT OF VIEW:
 Regular Fixed Income.
 Preferential Rights.
 Lesser Capital Losses.
 Fair Security.

12.  COMPANIES POINT OF VIEW:
 Higher Rate of Dividend.
 Financial Burden.
 Dilution of Claim Over Assets.
 Adverse effect on credit-worthiness.
 Tax disadvantage.

13.  INVESTORS POINT OF VIEW:
 No Voting Right.
 Fixed Income.
 No claim over surplus.
 No Guarantee of Assets.

14.  I) Irredeemable Preference Share:
This type of preference share may be
treated as a perpectual security if it have no redemption period
so the investor can get their investment value at the time of
winding up of a company.
 II) Redeemable Preference Share:
This type of preference share may
have an predetermined redemption period &
redemption value so investor can get their investment
value after an particular period.

15.  I) Irredeemable Preference Share:
Kp = Dividend
Po
II) Redeemable Preference Share:
Kp = Dividend + RV – SV
n
RV + SV
2
WHERE,
Kp = COST OF PREFERENCE SHARE
Po = PRICE OF SHARE
RV= REDEMPTION VALUE
SV = SELL VALUE / NET VALUE
N = REDEMPTION PERIOD