Preference shares resemble debentures as they bear ________ rate of return.

fixed

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fluctuating

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higher

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lower

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Solution

The correct option is A fixed
The capital raised by issue of preference shares is called preference share capital.Debentures are an important instrument for raising long term debt capital. Both resembles each other as they bear fixed rate of return on the capital that has been raised.

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Similar questions

How do preference shares resemble debentures?

Q. The rate of dividend on preference shares is generally _________ than the rate of interest on debentures.

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.

Q. Preference shares are called securities, as these shares have the features of equity shares and debentures.

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 resemble debentures as they bear ________ rate of return.

The correct option is A fixedThe capital raised by issue of preference shares is called preference share capital.Debentures are an important instrument for raising long term debt capital. Both resembles each other as they bear fixed rate of return on the capital that has been raised.

The correct option is A fixed
The capital raised by issue of preference shares is called preference share capital.Debentures are an important instrument for raising long term debt capital. Both resembles each other as they bear fixed rate of return on the capital that has been raised.