Company Finance Flashcards
What are the two main “classes” of share?
Ordinary and Preference
What rights do ordinary shares carry?
- The primary voting rights of the company
- Right to a dividend (if declared)
- Rights to participate in a surplus on winding up (although they will rank below preference shares)
What is a dividend?
A sum of money paid by a company to its shareholders out of its profits
Which type of share takes priority as to both capital and dividends? Ordinary or Preference shares?
Preference shares
What are the four types of preference share?
- Cumulative
- Non-cumulative
- Participating
- Convertible
Cumulative preference shares:
The company must pay the preference shareholder any dividend arrears
(missed dividends) before it can pay ORDINARY shareholders a dividend.
Non-cumulative preference shares:
If there are insufficient profits to pay a dividend in one year then the unpaid
dividend will not be paid in future years.
Participating preference shares:
The shares come with a right to an additional payment of a share of the
profits of the company, in addition to a fixed dividend.
Convertible preference shares:
The dividend may be exchanged for ordinary shares at a specified price
and after a specified date.
