Question : Assertion-Reason Questions: Chapter - Sources of Business Finance
Questions : Equity Shares and Preference Shares
Assertion: Equity shares offer shareholders fixed dividend payments.
Reason: Equity shareholders have priority in dividend distribution.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Both assertion and reason are false.
Correct Answer: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
Equity shares do not offer fixed dividend payments. Dividends for equity shareholders are typically decided by the company's board of directors and are not guaranteed or fixed. They are subject to the company's profitability and the decision of the board.
Equity shareholders do have ownership in the company, but they do not have priority in dividend distribution. Preferred shareholders usually have priority in dividend distribution over equity shareholders, if dividends are being distributed.
Assertion: Equity shares do not carry any fixed dividend liability.
Reason: Equity shareholders receive dividends before preference shareholders.
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