Question : Questions : Different Sources of Finance
Statement 1: Equity shares carry a fixed dividend obligation for the company.
Statement 2: Equity shareholders have a preferential claim on assets during liquidation.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statements 1 and 2 are true.
Option 4: Both statements 1 and 2 are false.
Correct Answer:
Statement 1 is false, and statement 2 is true.
Solution : The correct answer is (b) Statement 1 is false, and statement 2 is true.
Statement 1 is false. Equity shares do not carry a fixed dividend obligation for the company. The dividends paid to equity shareholders are usually at the discretion of the company's board of directors and depend on the company's profitability and financial situation.
Statement 2 is true. In the event of a company's liquidation, equity shareholders have a residual claim on the company's assets after all debts and preferred stock obligations are settled. Preferred shareholders have a preferential claim, but equity shareholders come after them in the order of claims during liquidation.
Related Questions
Trending Articles/News
