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Management Buyout and Preference Shares
14y ago
14y ago#1The reason management might buy a loss-making business is because they think they can make it profitable, and to preserve their jobs!
Preference shares are treated as debt for financial management because they get a fixed dividend and are therefore like debt with fixed interest.
If they are redeemable then you calculate IRR like you would for debt.
Dividends on preference shares are paid each year provided there are sufficient profits. If there are not sufficient profits then non-cumulative lose what they do not get, whereas cumulative will get it in later years when there is a profit.
Preference shares are treated as debt for financial management because they get a fixed dividend and are therefore like debt with fixed interest.
If they are redeemable then you calculate IRR like you would for debt.
Dividends on preference shares are paid each year provided there are sufficient profits. If there are not sufficient profits then non-cumulative lose what they do not get, whereas cumulative will get it in later years when there is a profit.
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