Preference shares have a fixed dividend rate that is determined at the time of issue and is paid before the ordinary shareholders receive their dividend. Preference shares may also have other preferential treatment, such as priority over ordinary shares in the event of liquidation. However, they do not rank ahead of company creditors, who have first claim on the company's assets in the event of liquidation.

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Preference Shares

Question 65

Multiple Choice

Preference shares:

A) have their dividend fixed at the issue date.
B) rank behind ordinary shares in the payment of dividends.
C) rank behind ordinary shareholders in their claim on company assets in the event of liquidation.
D) rank ahead of the company creditors.

Correct Answer: