Preference Shares Are Often Considered to Be Closer to Debt

question 28

Multiple Choice

Preference shares are often considered to be closer to debt as they:

• A) may be issued with the condition that they are redeemable by the company in the future.
• B) may guarantee a regular or cumulative payment, similar to interest.
• C) may be able to be converted into ordinary shares at a specific date in the future, indicating they are a liability until that time.
• D) may guarantee a regular or cumulative payment, similar to interest and may be able to be converted into ordinary shares at a specific date in the future, indicating they are a liability until that time.

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Definitions:

Liquid Asset

Assets that can be quickly and easily converted into cash without significant loss in value.

Store Of Value

An asset that can be saved, retrieved, and exchanged at a later time, and is predictably useful in the future to purchase goods and services.

Medium Of Exchange

A system or object that is widely accepted in exchange for goods and services, facilitating trade by eliminating the need for a barter system.

Unit Of Account

A standard numerical monetary unit of measurement that provides a uniform measure of the value of goods and services.