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Business Studies

Preference Shares

Payment of fi...

Question

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.

A

True

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B

False

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Solution

The correct option is A
True

True. 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.

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Similar questions

Differentiate between equity shares and preference shares on the basis of :

(a) Payment of dividend

(b) Refund of capital

(c) Rate of dividend

(d) Voting Rights

Q. The authorised capital of M Ltd. consists of both cumulative preference shares and equity shares. Each

5

% cumulative preference share has a par value

R s . 100

. Each equity share has a par value

R s . 10

. During the year

2005 - 06

, the cumulative preference share capital was

R s . 2, 00, 000

If dividend declarations totalled

R s . 25, 000

2005 - 06

, the dividends allocated to the equity shareholders in the year

2005 - 06

will be ___________.

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. A company declares

8

percent divided to the shareholders. If a man receives

R s . 2840

as his dividend, find the nominal value of his shares.

Q. A company with 10,000 shares of nominal value of Rs 100 declares an annual dividend of

8 %

to the shareholders.
(i) Calculate the amount of dividend paid by the company.
(ii) Ramesh had bought 90 shares of the company at Rs 150 per share. Calculate the dividend he receives and the percentage return on his investment.
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