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    Question

    Which of the following is not a characteristic of

    preference shares?
    A They represent a class of equity with preferential rights. Correct Answer Incorrect Answer
    B They usually carry a fixed rate of dividend. Correct Answer Incorrect Answer
    C Preference shareholders generally do not enjoy voting rights. Correct Answer Incorrect Answer
    D Their dividend is paid only after the claims of equity shareholders. Correct Answer Incorrect Answer
    E They may carry a fixed redemption (maturity) period. Correct Answer Incorrect Answer

    Solution

    Preference shares are a special category of share capital that grants shareholders certain priority rights over equity shareholders: • They are considered a type of equity but with preferential rights over dividend distribution and repayment of capital at winding up (Statement A → True). • Preference shareholders are generally entitled to a fixed dividend (Statement B → True). • They do not carry voting rights, except in special circumstances (Statement C → True). • Importantly, dividends on preference shares are paid before equity shareholders, not after (Statement D → False). • Certain types of preference shares may also come with a fixed maturity/redemption period (Statement E → True).

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