JAMB Economics 1995 Question 25

Question 25

Business Organisations

In a joint stock company, preference shareholders are those who receive

  1. A.high dividends when profits are high and little or nothing when profits are low
  2. B.a fixed rate of dividend and have the first claim on the net profits of the company
  3. C.the remaining profits after all other shareholders have been paid
  4. D.dividends quarterly when others receive annually.
Show the answer and explanation

Answer: B (a fixed rate of dividend and have the first claim on the net profits of the company)

Explanation

Preference shares carry a fixed rate of dividend, paid before ordinary shareholders receive anything.