Classification of preference share capital, Finance Basics

Classification of Preference Share Capital

i) Redeemable Class

Redeemable preferential shares are bought back via Issue Company after minimum redemption duration however before expiring of maximum redemption time after that they become creditors.

ii) Irredeemable Preference Shares

Are perpetual preference shares like they will not be redeemed in the company's duration unless it is within liquidation, it is permanent.

iii) Non-Participative Preference Shares

These do not claim any money above and over their par value, although are generally redeemable and cumulative.

iv) Cumulative Preference Shares

These can claim arrears as an example whether a company sold 10% Shs.20 preference shares and did not pay dividends for the after that two years, so in the third year shareholders will claim as:

10% x 20 x 3yrs   = Shs 6 less withholding tax:

                            = Shs 6 less 5% of Shs 0.30

                            = Shs 5.70 net

v)  Non-Cumulative Preference Shares

These cannot claim interest in arrears.

vi) Convertible

These can be converted in ordinary shares as that is optional.

Conversion ratio = par value of ordinary share/par value of preference shares as example of whereas par value of ordinary shares is Sh.10 and that of preference shares is Sh.20, then conversion ratio = 10/20=1/2 that is for every preference share you get 2 ordinary shares.

Conversion price par value of preference shares per no. of ordinary shares to be obtained.

20/2=shs10

vii) Non-Convertible Preference Shares

These cannot be transformed into ordinary shares.

Posted Date: 1/29/2013 3:17:09 AM | Location : United States







Related Discussions:- Classification of preference share capital, Assignment Help, Ask Question on Classification of preference share capital, Get Answer, Expert's Help, Classification of preference share capital Discussions

Write discussion on Classification of preference share capital
Your posts are moderated
Related Questions
Profitability Ratio These ratios signify the performance of the firm in relation to its capability to derive returns or profit from investment or from sale of goods that is pr

how ca i calculate the common stock dividends in the income statement if it is not mentioned

An industrial engineer proposed the purchase of a RFID Fixed Asset Tracking System for the company's warehouse and weave rooms.  The engineer though that the system would provide a

Acceptance Rule of IRR IRR will accept a venture if its IRR is higher than or equivalent to the minimum required rate of return such is usually the cost of finance also recogn

Expectation Theory The theory states here that the yield curve depends on the expectation concerning with future inflation rates. The rate on long-term bonds will exceed, If i

The operating and cost data of ABC Ltd. are: Sales Rs. 20,00,000 Vari

Tarniwala and Dealer in Non-cleared Securities Tarniwala: He/she is a specialist or jobber in selected shares. He/she makes market i.e. provide continuity to dealings. They

What are the factors that affect the interest rate and how?

Bills of Exchange Bills of Exchange are a source of finance in specifically in the export trade. A bill of swapping is an unconditional arrange in writing addressed via one pe

Reasons for Different Interest Rate Interest rates may differ in different market and market segment since: i) Size of the loan: Deposits above specific amounts into the