How Do You Spell PREFERENCE SHARE?
Pronunciation: [pɹˈɛfɹəns ʃˈe͡ə] (IPA) 
Pronunciation: [pɹˈɛfɹəns ʃˈe͡ə] (IPA)
Preference shares, also known as preferred shares or preferred stock, are a type of shares or equity investments issued by a company. It represents a class of share capital that enjoys certain preferential rights and privileges over common or ordinary shares.
Preference shares offer their holders a preferential claim on the company's profits and assets. Shareholders of preference shares have priority in receiving dividends or profits before common shareholders. These dividends are usually paid at a fixed rate or in the form of a fixed amount, providing a consistent income stream to the shareholders. In the event of liquidation or bankruptcy, preference shareholders have priority to receive their investment back ahead of common shareholders.
Preference shares often do not carry voting rights or have limited voting rights, allowing the holders to focus on income generation rather than participating in the management and decision-making of the company. However, some preference shares may have additional rights, such as the ability to convert into common shares or participate in certain corporate actions.
These shares are considered less risky compared to common shares, as they offer a more predictable income stream and a stronger claim on the company's assets. They are commonly preferred by income-oriented investors seeking regular dividends with limited exposure to the company's fluctuations and market volatility.
Overall, preference shares represent a class of equity investments providing preferential rights and income benefits to the shareholders while limiting their voting rights.
The term "preference share" is derived from the combination of the words "preference" and "share".
"Preference" comes from the Latin word "preferre", which means "to hold in higher esteem or value". In finance and business contexts, "preference" refers to a special advantage, priority, or privileged position given to a certain entity or class of individuals.
"Share" refers to a portion or part of something that is distributed or owned by multiple individuals. In the context of finance, a share represents ownership in a company or corporation.
Therefore, the term "preference share" refers to a specific type of share that holds a higher rank or priority compared to common shares in terms of rights and privileges. Preference shares usually have certain preferences over common shares, such as preferential dividend payments, priority in asset distribution during liquidation, or special voting rights.
