Question

What preferential rights are enjoyed by preference shareholders? Explain.

Answer 1

Answer:

The following preferential rights are enjoyed by preference shareholders (i) Receiving a fixed rate of dividend, out of the net profits of the company, before any dividend is declared for equity shareholders.

Answer 2

Answer:

The  preference shareholders enjoy a  preferential position over equity

shareholders in two ways:

(i) receiving a fixed rate of dividend,  out of the net profits of the  company, before any dividend is  declared for equity shareholders;

(ii) receiving their capital after  the claims of the company’s  creditors have been settled, at the  time of liquidation.