Company A issues preference shares to Company B, the terms of which entitle party B to redeem the preference shares for cash if Company A's revenues fall below a specified level. From Company A's perspective the preference shares are:
A) an equity instrument
B) a financial liability
C) a compound financial instrument
D) a financial asset

Question

Quizplus · Accepted Answer

The terms of the preference shares give Company B the right to redeem them for cash if Company A's revenues fall below a specified level, making them a financial liability for Company A.

Company a Issues Preference Shares to Company B, the Terms