On redemption of preference shares money cannot be arranged (for payment to shareholders) from ________________.

issue of new shares

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sale of investment

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sale of fixed assets

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bank loan or overdraft

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Solution

The correct option is C sale of fixed assets
A company may issue this type of shares on the condition that the company will repay the amount of share capital to the holders of this category of shares after the fixed period or even earlier at the discretion of the company. Section 80 of the Companies Act, 1956 deals with the redemption of preference shares.

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Similar questions

Payment of fixed rate of dividend to preference shares may enable a company to declare higher rates of dividend for the equity shareholders in good times.

Assuming that Proprietary Ratio is 0.6 : 1, state giving reasons, whether the ratio will increase, decrease or will not change in each one of the following cases:

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(ii) Issue of equity shares against purchase of machinery.

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(vi) Buy-back of its own shares by a company.

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(x) Sale of a fixed asset costing Rs. 2,00,000 for Rs. 2,50,000.

(xi) Issue of Bonus Shares.

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