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Hello sir, Im having a little bit of confusion on preference shares.
Why we considered irredeemable preference shares as debt? because in accounting, it is classified as equity. is it because of the constant div paid by the company? I just dont get it why it is debt.
Irredeemable preference shares are classified in the accounts as equity. Redeemable preference shares are classified in the accounts as debt because they are repayable.
(In both cases the dividends are of a fixed amount).In Paper FM that is of little relevance (unless you are asked to prepare forecast accounting statements). Whether redeemable of irredeemable they are both part of the calculation of the WACC.
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