Characteristics of preference shares include:

Question

Quizplus · Accepted Answer

A) Cumulative preference shares give priority to shareholders for receiving dividends before ordinary shareholders, even in case of losses or poor earnings by the company. If the company misses paying dividends in a particular year, the unpaid dividend amount accumulates, and the preference shareholders receive their unpaid dividends before ordinary shareholders.

B) Participating preference shares have the potential to earn additional dividends over and above the fixed rate of dividends, which they receive after ordinary shareholders have been paid. The participation feature allows the preference shareholders to benefit from additional profits.

C) Redeemable preference shares are those that are issued with a redemption feature, which means that the company can buy back these shares at their face value on a specified date, or according to a schedule mentioned in the terms of issuance. This feature gives the company flexibility to manage its capital structure and capital requirements.

Characteristics of Preference Shares Include