Explain any two merits and two demerits of raising funds through preference
CBSE Class 11
CBSE Class 11 Business Studies
2017-04-12 13:22:43 UTC
Explain any two merits and two demerits of raising funds through preference shares.
2017-04-12 13:23:19 UTC
Preference share capital cannot be redeemed during the lifespan of the company. Hence, these are the sources of permanent capital.
The cost of issuing preference shares is economical.
The dividend paid to the preference shareholders is not a deductible expense while computing the tax liability of the company.
Investors willing to take risk and earn higher profit do not prefer preference shares.