Preference shares

Preference shares normally carry preferential rights over ordinary shares, often to dividends and repayment on winding up. Some preference shares have cumulative dividends or a right to redemption, while others do not. Read the terms before deciding what the holder can claim. In financial statements, a contractual obligation to deliver cash may make an instrument a liability despite its legal name. For example, a mandatory cash redemption obligation is relevant to classification as a liability.