explain preference shares as a long term source of capital
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The preference capitals can be very expensive financing source while compared with debt financing. The preference shareholders enjoy prior claims on the earnings and assets of the company. Skipping dividend payment may affect the image of the company adversely.
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Long-term funds from preference shares are raised by a public issue of shares. It does not require any security nor ownership of a firm is affected. It has some characteristics of equity capital and some of debt capital. It resembles equity as preference dividend, like equity dividend is not tax deductible payment.
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