Types of preference shares?
1 answersQuestion asked ( August 15, 2009 , Shopping / Finance )
What are the different types of preference shares? I’ve asked a couple of people and i’ve heard different answers. Are there too many types?
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Answer
There are many varieties of preference shares but the five important types of preference shares are as follows.
a. Cumulative preference shares- If the company fails to pay the dividends in a particular year, then the holders of these shares can carry forward the dividends to a future date of payment.
b. Non-cumulative shares – Here the dividends payment cannot be accumulated. If there are no profits then no dividends are paid.
c. Redeemable shares – They have fixed repayment schedule where the redemption can be at par or at premium.
d. Convertible shares –These hybrid shares give the option of converting itself to ordinary shares at specified time and terms.
e. Participating – the shareholders receive higher dividends, If the profits exceed certain level specified in the preference share conditions.
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