Consider the following statements:
Redeemable preference shares can be redeemed out of
1. sale proceeds of the new issue of shares.
2. sale proceeds of the new issue of debentures.
3. profits available for dividends.
4. sales proceeds of the fixed assets of the company.
Of these statements:

1 and 3 are correct

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1 alone is correct

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2, 3 and 4 are correct

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1, 2, 3 and 4 are correct

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Solution

The correct option is A 1 and 3 are correct
A company can issue new shares (equity or preference) and utilize its proceeds for redemption of preference shares. For this purpose, the new shares can be issued at par, premium or discount. It must be noted that the amount raised from the issue of debentures cannot be utilized for the redemption of preference shares.

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Similar questions

Q. Consider the following statements:
(1) Preference shares can be redeemed either out of profit of the company or out of the proceeds of fresh issue.
(2) Preference shares are redeemed after equity shares.
(3) Preference shareholders have preference right as to dividend as well as return of capital.
(4) A company cannot issue preference shares redeemable after 20 years.
The correct statements are ________________.

Q. Consider the following statements:
Redeemable preference shares of a company can be redeemed out of
1. Profits of the company which would otherwise be available for dividend.
2. Company's share premium account.
3.Fresh issue of shares made for the purpose of redemption.
Which of the above statements are correct?

Q. Preference Shares may be redeemed either out of the proceeds of issue of equity shares or out of divisible profits.

Assuming that the Debt-Equity Ratio is 2 : I, state, giving reasons, which of the following transactions would (I) Increase; (ii) Decrease; (ii.) Not alter the Debt-Equity Ratio :

(i) Issue of new shares (Preference/Equity) for Cash.

(ii) Issue of new shares (Preference/Equity) against purchase of fixed asset.

(iii) Buy-back of its own shares by a Company.

(iv) Issue of Debentures for Cash.

(v) Issue of Debentures against purchase of fixed asset.

(vi) Repayment of Long-term Borrowings.

(vii) Conversion of Debentures into Equity Shares/Preference Shares.

(viii) Sale of a fixed asset at par.

(ix) Sale of a fixed asset at profit.

(x) Sale of a fixed asset at loss.

(xi) Purchase of a fixed asset on a credit of 2 months.

(xii) Purchase of a fixed asset on long-term deferred payment basis.

(xiii) Issue of Bonus Shares.

Q. 1,00,000 equity shares of Rs. 10 each are issued at a discount of 10% to redeem the preference shares, the proceeds of a fresh issue under Section 80 is _______.

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Consider the following statements:Redeemable preference shares can be redeemed out of1. sale proceeds of the new issue of shares.2. sale proceeds of the new issue of debentures. 3. profits available for dividends.4. sales proceeds of the fixed assets of the company.Of these statements:

Consider the following statements:
Redeemable preference shares can be redeemed out of
1. sale proceeds of the new issue of shares.
2. sale proceeds of the new issue of debentures.
3. profits available for dividends.
4. sales proceeds of the fixed assets of the company.
Of these statements: