Company a Issues Preference Shares to Company B, the Terms

question 4

Multiple Choice

Company A issues preference shares to Company B, the terms of which entitle party B to redeem the preference shares for cash if Company A's revenues fall below a specified level. From Company A's perspective the preference shares are:

• A) an equity instrument
• B) a financial liability
• C) a compound financial instrument
• D) a financial asset

---

Definitions:

Monthly Payments

Regular payments made every month on a loan or mortgage over a set period, often including interest and principal.

Years

Units of time that represent the period it takes for the Earth to complete one orbit around the Sun, commonly used to measure durations or age.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as part of retirement planning to provide a steady income.