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Question : Case Study: PQR Enterprises - Funding Strategies for Diversification

PQR Enterprises is a well-established conglomerate planning to diversify its business operations. The company is evaluating various sources of business finance to support its diversification plans.

Questions : Equity Shares and Preference Shares

If PQR Enterprises issues redeemable preference shares, what does this mean?

Option 1: Shareholders can convert shares into debentures
 

Option 2: Preference shareholders can vote on company decisions
  

Option 3: The company has the option to buy back the shares

 

Option 4: Dividends on these shares are fixed and guaranteed


Team Careers360 23rd Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: The company has the option to buy back the shares

 


Solution : The correct answer is (c) The company has the option to buy back the shares

Redeemable preference shares are those that the issuing company has the option to buy back or redeem after a certain period, as specified in the terms of the share issue. This provides the company with flexibility in managing its capital structure and financial obligations. It does not involve converting shares into debentures, granting voting rights to preference shareholders , or guaranteeing fixed dividends.

 

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