Explain any two merits and two demerits of raising funds through preference shares

CBSE Class 11 CBSE Class 11 Business Studies
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Merits:

  1. Preference share capital cannot be redeemed j during the lifespan of the company. Hence, these are the sources of permanent capital.
  2. The cost of issuing preference shares is economical.
    Demerits:
    1.The dividend paid to the preference shareholders is not a deductible expense while computing the tax liability of the company.
  3. Investors willing to take risk and earn higher profit do not prefer preference shares.