Answered: Below are among the reasons why…

Business

Accounting

Below are among the reasons why preference shares are not permissible, except:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A6) Finance The OIC Fiqh Academy has ruled that preference shares are not permissible. Below are among the reasons why preference shares are not permissible, except: A. Priority in liquidation, violates principle that losses should be borne by partners in proportion to their capital contribution B. Fixed rate of dividend C. Higher payout is acceptable D. The issues regarding a hierarchy of capital suppliers is not in the spirit of Islamic partnership

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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