Section A

Which type of share typically carries a fixed rate of dividend that must be paid before any dividend is paid to other shareholders?

Answer options:

Ordinary shares

Deferred shares

Preference shares

Redeemable shares

How to approach this question

Identify the characteristics of different share classes.

Full Answer

C.Preference shares✓ Correct

Preference shares give the holder a preferential right to a fixed dividend (e.g., 5% of nominal value) before any dividend is declared on ordinary shares.

Common mistakes

Confusing preference shares with ordinary shares.

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Practice the full ACCA LW — Corporate and Business Law Practice Exam 5

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