Corporations issue preference shares to raise capital without sacrificing control of the corporation and/or to boost the return earned by ordinary shareholders.

Question

Quizplus · Accepted Answer

Preference shares are a type of security that gives shareholders a fixed dividend payment and priority over ordinary shareholders in the event of liquidation. By issuing preference shares, corporations are able to raise capital without diluting their ownership or control of the company. This can be beneficial for companies that want to maintain control while still raising funds for expansion or other purposes. Additionally, preference shares can also be used to enhance the return earned by ordinary shareholders by offering a higher dividend rate than what would be available through common shares alone. Therefore, the statement is true.

Corporations Issue Preference Shares to Raise Capital Without Sacrificing Control