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What are the Disadvantages of preference shares . |
| Answer» \tRate of dividend payable on preference shares is higher than the rate of interest on debenture\tThe claim of equity shareholders over assets of the company is affected by the issue of preference share capital.\tInvestors willing to take risk and earn higher returns do not prefer preference shares.\tSince dividend paid is not deductible from profits as expense, there is no tax saving as in case of interest on debentures or loans.\tThere is no consistent return for the investors because the dividend is payable to the preference shareholders only when the company earns profit. | |