what is the difference between preferred shares and a bond.?
1 Answer(s)
ABHISHEK
Preference shares are the part of a company capital on the other hand bond is a loan to the company.The percentage of dividend and interest on preference shares and bonds are fixed respectively.Interest on a loan has to be paid whether company earns a profit or not. But company will pay a dividend out of profit.But why would one buy preference shares instead of bonds depends upon one's risk appetite.If a company stops paying interest then it will be declared as a bankrupt company.Risk involved in equity shares is higher than preference shares and bonds.Similarly risk involved in bonds is less than that of preference shares.
Dec 20 2013 11:27 AM