What are preference shares? Explain types of preference shares.

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Understand the Problem

The question is asking to explain what preference shares are, along with detailing different types of preference shares. It seeks a clear definition and description of their characteristics and functionalities.

Answer

Preference shares have rights to dividends before common stocks. Types: cumulative, non-cumulative, participating, convertible.

Preference shares, or preferred stock, are equity securities with preferential rights to dividends before common stocks. Types include cumulative, non-cumulative, participating, and convertible shares.

Answer for screen readers

Preference shares, or preferred stock, are equity securities with preferential rights to dividends before common stocks. Types include cumulative, non-cumulative, participating, and convertible shares.

More Information

Preference shares offer a stable income with less risk compared to common shares. They often suit investors seeking regular dividends.

Tips

Confusing cumulative with non-cumulative shares is common; remember, cumulative shares accumulate unpaid dividends.

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