Question

Write any 5 merits of preference shares .​

Answer 1

$\red{ \huge{ \underline{ \overline{ \mid {\bold{ \purple{ \: \: ANSWER \: \: \red{ \mid}}}}}}}} \:$



$\bold{Preference \: \: shares \: \: are \: \: those \: \: shares} \\ \\ \bold{which \: \: get \: \: preference \: \: over \: \: equity \: } \\ \\ \bold{shares \: \: in \: \: respect \: \: to \: \: : } \\ \\ \bold{(i) \: \: The \: \: payment \: \: of \: \: dividend \: .} \\ \\ \bold{(ii) \: \: The \: \: repayment \: \: of \: \: investment} \\ \bold{amount \: \: during \: \: winding \: \: up \: .}$



$\underline{\underline{\mathbb{\pink{\: \: MERITS \: \: OF \: \: PREFERENCE \: \: SHARES \: \:}}}}$


$\bold{(1) \: \: Preference \: shares \: \: help \: \: to \: \: collect \: \: } \\ \bold{ \: \: \: \: \: \: \: large \: \: amount \: \: of \: \: funds \: .}$

$\bold{(2) \: Preference \: \: shares \: \: has \: \: no \: \: fixed \: \: liabilities \: .}$


$\bold{(3) \: \: Preferenece \: \: shareholders \: \: do \: \: not \: \: carry} \\ \bold{ \: \: \: \: \: \: \: any \: \: voting \: \: rights \: .}$

$\bold{(4) \: \: Preference \: \: shares \: \: do \: \: not \: \:make \: \: any} \\ \bold{ \: \: \: \: \: \: \: change \: \: on \: \: assets \: .}$

$\bold{(5) \: \: The \: \: rate\: \: of \: \: dividend \: \: on\: \: preference \: \: shares } \\ \bold{ \: \: \: \: \: \: \: \: are \: \: fixed \: .}$

Answer 2

Heya beautiful

Here is your answer

Advantages:

1. Appeal to Cautious Investors:

Preference shares can be easily sold to investors who prefer reasonable safety of their capital and want a regular and fixed return on it.

2. No Obligation for Dividends:

A company is not bound to pay dividend on preference shares if its profits in a particular year are insufficient. It can postpone the dividend in case of cumulative preference shares also. No fixed burden is created on its finances.

3. No Interference:

Generally, preference shares do not carry voting rights. Therefore, a company can raise capital without dilution of control. Equity shareholders retain exclusive control over the company.

4. Trading on Equity:

The rate of dividend on preference shares is fixed. Therefore, with the rise in its earnings, the company can provide the benefits of trading on equity to the equity shareholders.

5. No Charge on Assets:

Preference shares do not create any mortgage or charge on the assets of the company. The company can keep its fixed assets free for raising loans in future.

Hope this helps you...