Tyla Limited has total assets of £15,000,000 and total liabilities of £10,000,000 when the company goes into liquidation. The issued share capital of the company is £20,000,000 which is made up of 18,000,000 ordinary shares of £1 each and 4,000,000 4% preference shares of £0.50 each. Tyla Limited's assets are eventually sold for £10,600,000 and this cash is used to pay off the liabilities of £10,000,000 in full. How much cash will be repaid on each preference share?

Question

Quizplus · Accepted Answer

After paying off the liabilities of £10,000,000, £600,000 remains. This amount is distributed to preference shareholders first. With 4,000,000 preference shares, each share receives £600,000 / 4,000,000 = 15 pence.

Tyla Limited Has Total Assets of £15,000,000 and Total Liabilities