ADVANTAGES OF PREFERENCE SHARES

1. Special appeal to the cautious investors: Preference shares have got a special appeal to a particular class of individual and institutional investors want.  Such investors want to combine the security of return with the highest rate of return.

2. No heavy burdens: Preference shares do not impose heavy burdens on the finance of the company as the dividend to be paid is fixed and it is not payable if there is no profit.

3. Increased rate of dividend on equities: Preference shares may be issued in order to increase the rate of return for the equity shareholders and usually they do not participate in the increased prosperity of the enterprise.

4. Usefulness: Preference shares are particularly useful if its assets are not acceptable as sufficient collateral security for creditor ship securities as debentures.

5. Promoters cab retain control: By issuing preference shares the promoters can retain control over the affairs of the company as Preference shareholders have limited voting rights.

6. Conversion of debts into Preference Shares: The debts of the company may he converted into preference shares at the time of the re-organization of the company.

7. Preference shares in the form of bonus: Preference shares may be given as a bonus while marketing the bonds or common stock and thus be used as a tool to enhance the marketability of their securities.