A share is a unit of ownership. It is also referred to as equity. When one purchases a share in a company he/she becomes a part owner in that company. He/she will be entitled to certain rights e.g. dividend, voting etc. There are different types and they include the following:
Ordinary shares– shares that give the shareholder part ownership of the company in proportion to the number of shares held and entitle him to dividends. It is the risk capital that is entitled to residual claim assets in the event of liquidation.
Preference shares – shares bearing a fixed annual rate of dividend with a prior right over all ordinary shares in the distribution of dividends from annual profits and have a prior claim to repayment of capital on winding up of the company.
Redeemable preference shares – preference shares that can be redeemed by the company either at fixed dates and prices, or on certain specified terms at the discretion of the board.
Convertible preference shares – preference shares, which may be converted under specified conditions into a specified number of ordinary shares of the issuer.