The Classification of a Preference Share as an Equity Instrument

question 21

True/False

The classification of a preference share as an equity instrument or financial liability is:
A. Affected by a history of making distributions.
B. Affected by an intention to make distributions in the future.
C. Not affected by a history of making distributions.
D. Not affected by the other rights that attach to them if they are non-redeemable
E. None of the given answers.

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Definitions:

Profitability

A financial metric used to assess the ability of a business to generate earnings relative to its revenue, assets, equity, or other financial metrics.

Liquidity

How effortlessly an asset can be turned into cash without altering its market price.

Periodic Inventory System

An inventory accounting system where the inventory level is updated and the cost of goods sold is calculated at the end of a period, rather than after each sale.

Purchases Account

An account used in accounting to record the total cost of goods bought for resale during an accounting period.