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1. How preference shares are issued – are they issued at price more than nominal value then how do we differentiate them with share premium?
2. Is it true that the redeemable preference shares are those which will be expired after their tenure but irredeemable preference shares are those which will never be expired but how is that possible for a business to keep paying those shareholders forever?
3. Are redeemable preference shares and irredeemable preference shares are capital reserve or revenue reserve?
1 They are issued at the nominal value
2 It is true. Dividends on irredeemable preference shares are paid for ever provided that the company remains in existence. If the company goes bankrupt then the dividends obviously stop. If the company gets taken over then the buyer will have to pay off the preference shareholders and the dividends will stop.
3 They are not reserves. They appear on the SOFP as part of the share capital.
1. Could you please explain how can we differentiate between share capital and preference shares if both of them are issued at nominal value?
2. Is is true that preference shares are those shares issued to the preferred shareholders but if they are not paying more than ordinary shareholders to buy a share then how they are preferred to claim their right on assets before common shareholders?
3. Is it true that preference shares and share premium both are the components of the share capital?
4. Is it also true that since preference shares both redeemable and irredeemable are not part of the reserves then they cannot be paid as dividend; correct?
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