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- Critically discuss the view that preference shares are best described as debt rather than equity.Preference shares, as noted in AASB 132: Select one: a. should be regarded as debt when redemption is at the option of the holder or on a specified date. b. will be classified as debt or equity based on their legal form rather than the substance of the financial instrument. c. exhibit the characteristics of equity when they are non-redeemable. d. will have their classification as debt or equity affected by the intention to make distributions in the future1. Explain the variance sources of financing. 2. What is meant by security financing? 3. What is debt financing? 4. Critically examine the advantages and disadvantages of equity shares. 5. Discuss the features of equity shares. 6. What are the merits of the differed shares? 7. Explain the merits and demerits of preferences shares. 8. List out the types of debentures.
- Outline the advantages and disadvantages of dealing with preference shares from debt holders’ point of view. Give some critical comment.Compare and contrast the characteristics of bonds, common shares and preference shares from the perspective of an investor. Use the following template. Capital Market Equity Market Characteristics Debt Market Type of Securities Bond Preference Common Shares Shares Ownership Voting Right Maturity Date Potential for Capital Gain Regular Returns (Describe source and whether affected by firm's profits) Reliability of Investment Income (High, low) Priority of payment during liquidation (e.g. 1*, etc.) (8 marks)Select the answer that contains ONLY potentially dilutive securities. a. convertible debt, junk bonds, preferred stock and warrants b. cumulative preferred stock, warrants, investment-grade bullet bonds and options c. warrants, options and convertible preferred
- Preferred stock has characteristics of both liabilities and stockholders’ equity. Convertible bonds are another example of a financing arrangement that blurs the line between liabilities and stockholders’ equity. Items like these have led some to conclude that the present distinction between liabilities and equity should be eliminated. Under this approach, liabilities and equity would be combined into one category that includes both creditor and owner claims to resources. Required: 1. Define liabilities and stockholders’ equity. 2. Provide arguments in support of maintaining the distinction between liabilities and stockholders’ equity in the balance sheet. 3. Provide arguments in support of eliminating the distinction between liabilities and stockholders’ equity in the balance sheet. 4. Which do you recommend? Why?The valuation of a share of common stock is Blank______ that of a bond. Multiple choice question. as difficult as less difficult than more difficult thanExplain why preferred stock is considered to be a hybrid of equity and debt securities?
- The most difficult component cost of financing to measure is the cost of ________ a Preferred stock b Short-term debt c Common stock3. Which of the following categories of investments are reported at their fair values on the balance sheet and have unrealized holding gains and losses included as a separate component of stockholders' equity? a. held-to-maturity debt securitiesb. marketable securitiesc. available-for-sale securitiesd. trading securitiesWhich of the following statements is/are correct? i. The sale of stocks is also referred to as equity finance ii. The sale of bonds is also referred to as debt finance a.Only i b.Only ii c.Both i and ii are incorrect d.Both i and ii are correct