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

lower

No worries! We‘ve got your back. Try BYJU‘S free classes today!

higher

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

equal

No worries! We‘ve got your back. Try BYJU‘S free classes today!

medium

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is B higher
The capital raised by issue of preference shares is called preference share capital.Debentures are an important instrument for raising long term debt capital. A company can raise funds through issue of debentures, which bear a fixed rate of interest. The rate of dividend on preference shares is generally higher than the rate of interest on debentures.

Suggest Corrections

Similar questions

Q. If DFL of a firm is 1.61 EBIT is Rs.25,000 and the interest component is Rs.7,000 the dividend on preference shares that the firm paid assuming a tax rate of

30 %

is ____________.

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

A man bought 16 shares at ₹97 and gets a dividend of ₹128. Find the rate of dividend on the shares ?

A man buys a ₹ 10 share in a company at a premium of ₹ 2 which pays 9 % dividend. Find the rate of interest on his investment ?

Join BYJU'S Learning Program