Which is not true of preference shares? * A. Payment of dividends is mandatory if cumulative. B. Preference shares are convertible to ordinary shares or bonds. C. It is similar to debt financing in terms of limited cost payment. D. Cost is higher than cost of bonds.

Which is not true of preference shares? * A. Payment of dividends is mandatory if cumulative. B. Preference shares are convertible to ordinary shares or bonds. C. It is similar to debt financing in terms of limited cost payment. D. Cost is higher than cost of bonds.

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

Which is not true of preference shares? *

A. Payment of dividends is mandatory if cumulative.

B. Preference shares are convertible to ordinary shares or bonds.

C. It is similar to debt financing in terms of limited cost payment.

D. Cost is higher than cost of bonds.

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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