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Question : Case Study: LMN Ventures - Financing Innovation and Research

LMN Ventures is a research-driven technology company aiming to innovate and develop cutting-edge products. The company is exploring various sources of business finance to support its research and development endeavors.

Question:Equity Shares and Preference Shares

How do preference shares differ from equity shares in terms of dividend payments?

Option 1: Preference shares pay higher dividends
 

Option 2: Equity shares pay fixed dividends
 

Option 3: Preference shares pay no dividends

 

Option 4: Equity shares have fixed interest rates


Team Careers360 5th Jan, 2024
Answer (1)
Team Careers360 10th Jan, 2024

Correct Answer: Preference shares pay higher dividends
 


Solution : The correct answer is (a) Preference shares pay higher dividends

Preference shares typically pay higher dividends compared to equity shares. These dividends are predetermined and fixed, providing preference shareholders with a consistent income stream. On the other hand, equity shares do not have a fixed dividend rate; the payment and amount of dividends for equity shareholders are at the discretion of the company's management and are contingent on the company's profitability and dividend policy.

 

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