Question

With reference to business finance, explain the following:

Preference shares

Briefly describe the following sources of business finance.

Preference Shares

Answer 1

The company law defines preference shares as that part of share capital that enjoys the preferential right:

• To receive a dividend at a fixed rate during the life of a company.
• As to return of capital on winding up of the company. Preferential shareholders can enforce their right of getting a dividend on priority over the equity shareholders only when the dividend is declared.