Preference shares are those which carry preferential right in respect of _________. A. dividends B. repayment of capital C. both dividend and repayment of capital D. right to vote on all important motions in AGM

The correct answer is: C. both dividend and repayment of capital

Preference shares

are a type of equity share that gives the holder a preferential right over ordinary shareholders in respect of dividends and repayment of capital. This means that preference shareholders are entitled to receive a fixed dividend before any dividends are paid to ordinary shareholders. They are also entitled to be repaid their capital before ordinary shareholders in the event of a liquidation.

Ordinary shares, on the other hand, do not have any preferential rights. Ordinary shareholders are only entitled to a dividend if the company makes a profit, and they are only entitled to be repaid their capital if there is enough money left over after all other creditors have been paid.

Preference shares are often seen as a more secure investment than ordinary shares, as they offer a higher level of income and capital protection. However, they also offer a lower level of potential growth, as the dividend is usually fixed and the capital repayment is usually at par value.

Here is a brief explanation of each option:

• A. dividends
  Preference shareholders are entitled to receive a fixed dividend before any dividends are paid to ordinary shareholders. This means that if a company makes a profit of $100, it must first pay out the preference dividend of $50 before it can pay any dividends to ordinary shareholders.

• B. repayment of capital
  Preference shareholders are also entitled to be repaid their capital before ordinary shareholders in the event of a liquidation. This means that if a company goes bankrupt, the preference shareholders will be paid out their capital before the ordinary shareholders.

• C. both dividend and repayment of capital
  This is the correct answer. Preference shareholders are entitled to receive a fixed dividend before any dividends are paid to ordinary shareholders. They are also entitled to be repaid their capital before ordinary shareholders in the event of a liquidation.

• D. right to vote on all important motions in AGM
  Preference shareholders do not have the same voting rights as ordinary shareholders. They are usually only entitled to vote on matters that directly affect them, such as a change in the company’s articles of association.