Write short notes on Merits and demerits of preferance shares.
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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. The major disadvantage is that it is a costly source of finance and has preferential rights everywhere.
The advantages of preference shares for investors include:
Paid Dividends 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.
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