Preference shares are those which carry the preferential as to ___________________.

The payment of dividend at a fixed rate

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The return of capital on winding up of the company

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Both (A) & (B)

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Either (A) or (B)

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Solution

The correct option is C Both (A) & (B)
The capital raised by issue of preference shares is called preference share capital. Preference share holders enjoy preferential position over equity in two ways i.e the payment of dividend at a fixed rate & the return of capital on liquidation of company.

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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.

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

(a) Payment of dividend

(b) Refund of capital

(d) Voting Rights

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. Assertion :Preference shares capital is a more costly source of finance than debentures for profit-earning companies. Reason: Preference dividend is not a charge against profit under the Income Tax Act.

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.

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Preference shares are those which carry the preferential as to ___________________.

The correct option is C Both (A) & (B)The capital raised by issue of preference shares is called preference share capital. Preference share holders enjoy preferential position over equity in two ways i.e the payment of dividend at a fixed rate & the return of capital on liquidation of company.

The correct option is C Both (A) & (B)
The capital raised by issue of preference shares is called preference share capital. Preference share holders enjoy preferential position over equity in two ways i.e the payment of dividend at a fixed rate & the return of capital on liquidation of company.