There are two types of equity securities: common shares and preference shares.
Common shares represent an ownership interest in a company, including voting rights. They entitle investors to a share of the company’s operating performance, participation in decision making in the form of voting rights and claim on the company’s net assets in case of liquidation.
Preference shares are preferred over common shares while claiming a company’s earnings in the form of dividends, and net assets upon liquidation. Preference shares can be cumulative, non-cumulative, participating or non-participating.
Convertible preference shares are those which can be converted to common stock. The conversion ratio is specified when the shares are issued.