Question

Discuss the positives and negatives of purchasing ordinary shares, preference shares, convertible shares and bonds in regard to investors and issuers

Answer 1

Answer : Ordinary share are the share issued by the company to increase their share capital.

Positive of ordinary share capital from investor point of view are :

• Right to vote.
• Right to elect board of directors.
• Investor able to buy new stock as much as allow .
• Enjoy the right of ownership.

Negative of ordinary share capital from investor point of view:

• Share price flucations are lot which feel investor distress.
• Share analysis required hardworking.
• Risky investment.

Positive of ordinary share from issures point of view:

• No guarantee of profit has been provided.
• Large amount of money has been gurantee

• Less risky investment.

Negative of ordinary share from issures point of view :

• Ownership has been divided.

Preference shares:

Positive of preference shares are : (Investor)

• It provides preferential right to pay dividend and repayment of capital.
• Preference share provide a long term capital
• It earn fixed rate of return.
• It carries no preference rights.

Negative impact of preference shares are : (Investor)

• No voting right
• Fixed income generated
• No ownership

Positive of preference shares for issuers :

• No dividend in the year where profit are low.
• Does not restrict company borrowing power.

Negative of preference share for issuers:

• Dividend payment on preference share are not tax deductible.
• Level of payment should be higher than interest on yield.

Convertible shares:

Positive impact are ( Investor)

• Secured income
• Raised capital
• Option to convert into preference shares

Negative impact are :

• Lack of voting rights.
• Risky investment.

Positive impact for issuers:

• Easily accessible.
• Higher coverage

Negative impact:

• Time consuming
• True picture does not determined.

Bonds :

Positive impact are : ( Investor)

• Fixed investment.
• Secured income
• Higher security
• Less risky

Negative impact are( Investor)

• No ownership
• No right

Positive impact ( Issuers)

• No interfere of the bond holder
• Valueable investment.
• Fixed return

Negative impact:

• Regular payment has been given to bondholders whether company generated profit or loss.