Which of the following statements concerning preference shares is correct?

Question

Quizplus · Accepted Answer

Most issues of preference shares have a cumulative feature, meaning that if the company is unable to pay the dividend in a particular year, it will accumulate and be paid in a later year before any dividends are paid out to ordinary shareholders. Option A is incorrect, as ordinary shares typically have a higher cost of capital than preference shares. Option C is also incorrect, as dividend payments on preference shares are not tax-deductible. Option D is not necessarily true, as the risk level of preference shares depends on the specific terms and conditions of the share issue.

Which of the Following Statements Concerning Preference Shares Is Correct