Write the merits of preference shares.

1.	Write the merits of preference shares.
Answer» The merits of preference shares are: 1. Preference share is an important source of long-term capital for the company, as the preference share capital is required to be returned only after a long period of 10 years. 2. They do not involve the creation of any charge on the assets of the company. 3. They do not give the preference shareholders any control over the affairs of the company. 4. Preference shareholders get a fixed rate of dividend on their shares. 5. Preference shares are an attractive investment to cautious investors who desire a fixed rate of dividend. 6. Preference share capital is, generally, regarded as part of equity or net worth of the company. This increases the credit-worthiness of the company.

Answer»

The merits of preference shares are:

1. Preference share is an important source of long-term capital for the company, as the preference share capital is required to be returned only after a long period of 10 years.

2. They do not involve the creation of any charge on the assets of the company.

3. They do not give the preference shareholders any control over the affairs of the company.

4. Preference shareholders get a fixed rate of dividend on their shares.

5. Preference shares are an attractive investment to cautious investors who desire a fixed rate of dividend.

6. Preference share capital is, generally, regarded as part of equity or net worth of the company. This increases the credit-worthiness of the company.

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