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Questions and Answers
Which feature of preference shares gives them priority in receiving dividends?
Which feature of preference shares gives them priority in receiving dividends?
What is the main advantage of preference shares over equity shares in terms of capital repayment?
What is the main advantage of preference shares over equity shares in terms of capital repayment?
What determines the rate of dividend for preference shares?
What determines the rate of dividend for preference shares?
What happens if the company decides not to pay dividend to preference shareholders?
What happens if the company decides not to pay dividend to preference shareholders?
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What is the nature of capital provided by preference shares?
What is the nature of capital provided by preference shares?
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Study Notes
Preference Shares
- Priority in receiving dividends is a key feature of preference shares.
Priority in Capital Repayment
- Preference shares have an advantage over equity shares in terms of capital repayment, as they are repaid before equity shares in the event of liquidation.
Dividend Rate Determination
- The rate of dividend for preference shares is determined and fixed at the time of issue.
Dividend Non-Payment
- If the company decides not to pay a dividend, preference shareholders do not receive any dividend for that year, but the amount is carried forward and must be paid before any dividend can be paid to equity shareholders.
Nature of Capital
- The capital provided by preference shares is considered a form of debt capital, as it carries a fixed rate of return and repayment of principal amount.
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Description
Test your knowledge on the features of preference shares with this quiz! Learn about the preference for dividends and repayment of capital that preference shareholders enjoy over equity shareholders.
