Question

Merits of preference share

Answer 1

Answer:

• Dividends paid first.
• Higher claim on company assets.
• Additional investor benefits.
• Lack of shareholder voting rights.
• Right to repurchase shares.
• Investors can't vote.
• Higher cost than debt for issuing company.

Answer 2

Answer:

Preference shares are hybrid financing instruments having several benefits and disadvantages of using them as a source of capital. Benefits are in the form of an absence of a legal obligation to pay the dividend, improves borrowing capacity, saves dilution in control of existing shareholders and no charge on assets.