Question

Which of the following are the features of preference shares?

Options

• Dividend at a fixed rate is payable on these shares before any dividend is paid on equity shares.

• Preference shares carry voting rights.

• They are borrowed funds.

• At the time of winding up the company, capital is repaid to equity shareholders prior to the return of preference capital.

Answer 1

Dividend at a fixed rate is payable on these shares before any dividend is paid on equity shares.

Explanation:

Preference shares pay a fixed-rate dividend that is paid before any dividend on equity. They also have priority in repayment in the event of a winding up, generally lack voting rights, and are not treated as borrowed funds.