Types of Preference Shares
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Questions and Answers

Which type of preference shares allows the dividend to accumulate if it is not fully paid?

  • Participating Preference Shares
  • Cumulative Preference Shares (correct)
  • Convertible Preference Shares
  • Non-cumulative Preference Shares
  • What happens to the unpaid dividend on non-cumulative preference shares?

  • It gets carried forward to the next year
  • It is paid out of profits of that year only
  • It gets accumulated and paid in the future
  • It is lost forever if not paid in a particular year (correct)
  • Which type of preference shares entitle the holders to participate in surplus profits?

  • Cumulative Preference Shares
  • Redeemable Preference Shares
  • Non-cumulative Preference Shares
  • Participating Preference Shares (correct)
  • If a company does not make a profit in a particular year, what happens to the right to claim dividend on non-cumulative preference shares?

    <p>It is lost forever</p> Signup and view all the answers

    What does the term 'irredeemable' mean in relation to preference shares?

    <p>The shares cannot be redeemed by the company</p> Signup and view all the answers

    Which type of preference shares are always cumulative unless otherwise stated in the Articles of Association?

    <p>Cumulative Preference Shares</p> Signup and view all the answers

    What is the primary characteristic of non-participating preference shares?

    <p>Entitled to a fixed rate of dividend</p> Signup and view all the answers

    What distinguishes redeemable preference shares from irredeemable preference shares?

    <p>The payment on winding up of the company</p> Signup and view all the answers

    What is the key characteristic of convertible preference shares?

    <p>Convertible into equity shares</p> Signup and view all the answers

    What happens if a company issues redeemable preference shares?

    <p>They must be fully paid.</p> Signup and view all the answers

    Under what condition are irredeemable preference shares payable?

    <p>Only on winding up of the company</p> Signup and view all the answers

    What are non-convertible preference shares not able to do?

    <p>Be converted into equity shares</p> Signup and view all the answers

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