Preference Shares Are No Longer a Major Source of New

question 37

Multiple Choice

Preference shares are no longer a major source of new finance for companies as:

• A)they are too risky.
• B)their dividends are not tax deductible.
• C)interest rates over the past few years have been at an all-time low.
• D)Both B and C.

Learn the reasons behind different variances and their impact on a company’s financial performance.

Understand the significance and impact of negative and affirmative covenants in lending agreements.

Recognize the concept of agency costs and how it affects the relationship between principals and agents.

Identify the conditions and consequences of payment default.

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Definitions:

Legal Obligation

A duty that is legally enforceable because it arises out of a contract or legal requirement.

Defined Benefit Obligation

A company's liability to pay its employees' retirement benefits, calculated based on factors like salary histories and years of service.

Current Period

Refers to the present accounting period under consideration, usually a fiscal quarter or year.

Defined Contribution Fund

A retirement plan in which the employer, employee, or both make contributions on a regular basis, but future benefits are based on the fund's investment performance.