Assignment First

  本篇代写-优先股和股息讲了优先股给予优先持有人比其他类别的持有人更多的权利来支付股息。股权和优先股的资金将用作资本,因此,公司有责任偿还股权和优先股股东的资金。利润作为股息支付给股东,固定利息支付给优先股股东。没有责任支付股息给股东,但优先股股东有权获得固定利息,而不管公司赚取的利润。在特定的任期结束后,优先股将按照合同条款进行赎回。本篇代写文章由加拿大第一论文 Assignment First辅导网整理,供大家参考阅读。

  2.1 Preference share and its characteristics

  The preference shares give rights to the preferential holders than other class of holders in payment of dividends. The funds in equity and preference will be used as capital, and hence, it is liability to the company to repay the amount to the equity and preference shareholders. The profits are paid as dividend to the equity shareholders while fixed interest is paid to the preference share holders. There is no liability to pay dividend to the equity holders, but preference share holders right to receive fixed interest irrespective of profits earned by the company. After a specific tenure, the preference shares will be redeemed as per the terms of contract (ASIC –Australian Securities Investments Commission, 2016).

  2.2 Equity or liability

  The term of liability is attached when there is guaranteed payment. In case of equity shares, there is no guarantee for any payment either dividend or for the investment. On the other hand, the payment of interest is attached with the preferential holders. After the tenure, the principal amount is payable to the holders. Therefore, the company is liable to pay interest and fixed amount. The shares are redeemable preference shares and principal amount is guaranteed to repay.

  2.3 Conclusion

  In the given case, the company issued 3% redeemable preference shares to the preference shareholders. It means that the company is need of funds to run the business. The existing equity capital might used and there be short fall of funds. The cost of equity may be higher, hence the company issued preference shares with just the interest of 3% which is very low and company will be benefited with such low cost of debt.

  In order to raise finance, a financing arraignment made between the company and preference shareholder trough a scheme of 3% redeemable preference share. The scheme indicates the payment of fixed interest with a term of purchasing from the holder after paying principal amount (Australian Government Australian Taxation Office, 2016).

  The company need to pay principal as well as fixed interest by way of dividend to the preference shareholders. There is no statutory requirement paying the dividend to the equity holders when there are no sufficient funds. Nevertheless, as far as dividend and principal payment, the company needs to pay which indicates the liability. Hence, the existing 3% redeemable preference shares along with dividend is a liability to the company.

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