Cost of Preference Shares Homework Help

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For understanding cost of preference shares first the meaning of preference shares has to be understood. The shares which have two preferential rights explained in the following section of the Cost of Preference Shares Homework Help are known as the preference shares. The rights are: dividends are collected at fixed rate from these shares before any dividend on equity shares and at the time of winding up of the company the return of preference shares capital has to be done first and then the return of equity share capital. These shares also have another right to participate in the premium at the time of redemption but these shares don’t have any voting rights. Simpler understanding of cost of preference shares and different types of preference shares is provided in the Cost of Preference Shares Homework Help. The portion of the cost of capital which is used to calculate the amount payable to the preference shareholders in the form of dividend which has a fixed rate is known as the cost of preference shares.
 

Types of Preference Shares

 
The different types of preference shares discussed in Cost of Preference Shares Homework Help are given below
• Redeemable preference shares- The shares which can be redeemed and repaid after the expiry period of the term or can be redeemed after giving the prescribed notice to the company are known as Redeemable preference shares and the terms of redemption of such shares are announced at the time of issue.
 
• Non-Redeemable preference shares- The shares which cannot be redeemed even in the lifetime of the company are known as the non-Redeemable preference shares and the amount for these shares are paid at the time of liquidation of the respective company.
 
• Cumulative preference shares- The shares on which dividends are not paid regularly then the unpaid dividends are carried forward to the subsequent years and accumulation of the dividend occurs until it is paid off in full. For clear growth of concept, students can refer Cost of Preference Shares Homework Help.
 
• Non-cumulative preference shares- The shares in unpaid dividends do not carry arrears and the unpaid dividends of one year are not mandatory to be paid out of future profits and the shares which have right to get fixed rate of dividend for the current year only are known as the non-cumulative shares.
 
• Participating and non-participating preference shares- Those shares which have the right to participate in the profits of the company after having paid the equity shareholders and at a fixed rate of their dividends are known as the participating preference shares and the shares which don’t have the feature above stated are known as non-participating preference shares.
 

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