[amp_mcq option1=”Increases OL” option2=”Increases FL” option3=”Decreases OL” option4=”Decreases FL” correct=”option1″]<\/p>\n
The correct answer is: A. Increases OL<\/strong><\/p>\n Preference shares are a type of equity share that gives the holder a preference over ordinary shareholders in terms of dividends and capital repayment. This means that preference shareholders must be paid a dividend before ordinary shareholders, and they must also be repaid their capital before ordinary shareholders if the company is liquidated.<\/p>\n As a result of these preferences, preference shares are considered to be a more senior form of debt than ordinary shares. This means that they are included in the company’s operating liabilities<\/strong> (OL), which are the debts that the company must repay within the normal operating cycle.<\/p>\n Ordinary shares, on the other hand, are considered to be a more junior form of debt. This means that they are not included in the company’s OL, but are instead included in its financial liabilities<\/strong> (FL).<\/p>\n Therefore, the use of preference share capital in a company’s capital structure will increase its OL.<\/p>\n Here is a brief explanation of each option:<\/p>\n [amp_mcq option1=”Increases OL” option2=”Increases FL” option3=”Decreases OL” option4=”Decreases FL” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-57312","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n\n