7 Questions
Which type of investment represents a debt owed by the company and usually pays a fixed rate of interest?
Debentures
What type of shares typically receive a fixed dividend and have priority over ordinary shares in the distribution of profits?
Preference Shares
Which type of shares entitle the holders to voting rights in the company's decisions?
Equity Shares
Which type of shares have a feature that allows any unpaid dividends to accumulate and must be paid before dividends are paid to other types of shares?
Cumulative Preference Shares
What is the primary purpose of issuing shares?
To raise capital by selling ownership in the company
What is a key feature of issuing debentures?
Paying a fixed rate of interest to the debenture holders
What distinguishes the issue of shares from the issue of debentures?
Shares offer voting rights while debentures do not
Study Notes
Investments and Shares
- Debentures represent a debt owed by the company and usually pay a fixed rate of interest.
- Preference shares typically receive a fixed dividend and have priority over ordinary shares in the distribution of profits.
- Ordinary shares entitle the holders to voting rights in the company's decisions.
- Cumulative preference shares have a feature that allows any unpaid dividends to accumulate and must be paid before dividends are paid to other types of shares.
Purpose of Issuing Shares
- The primary purpose of issuing shares is to raise capital for the company.
Debentures vs. Shares
- A key feature of issuing debentures is that they represent a debt obligation, whereas shares represent ownership.
- The issue of shares is distinguished from the issue of debentures in that shares represent ownership, while debentures represent a debt obligation.
Test your knowledge about preference shares and debentures with this quiz. Identify the features and characteristics of these types of investments.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
