Question 5 Which of the following is NOT a feature of ordinary shares: From the business's perspective ordinary shares can be an effective form of financing compared to borrowing because it is possible to avoid paying a dividend but not usually possible to avoid interest payments. Ordinary shares issue is a source of internal finance available to a business. Ordinary shareholders are not entitled to a fixed rate of dividends. The potential losses for ordinary shareholders are limited to the amount that they have invested in the company.So their downside risk is limited.

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Question 5 Which of the following is NOT a feature of ordinary shares: From the business's perspective ordinary shares can be an effective form of financing compared to borrowing because it is possible to avoid paying a dividend but not usually possible to avoid interest payments. Ordinary shares issue is a source of internal finance available to a business. Ordinary shareholders are not entitled to a fixed rate of dividends. The potential losses for ordinary shareholders are limited to the amount that they have invested in the company.So their downside risk is limited.

Answer 1

Ordinary shares issue is a source of internal finance available to a business.

Answer 2

## Step 1: Understanding the question and contextThis question examines your knowledge of various characteristics related to ordinary shares. The properties often associated with ordinary shares differ substantially from those of other financial instruments. While investors hold ordinary shares, they rarely get entitled to a fixed rate of dividends, the risk for them is limited to their invested amount in the company, the issue may include internal finance sources for a business, and potentially, companies can avoid paying out dividends which is not the usual case for borrowed money where important payments cannot usually be omitted.## Step 2: Solving the given problemThe essential part of solving this is to identify the statement or feature which generally is not associated or correct regarding ordinary shares. Considering each of the statements provided, we find that they all correctly depict characteristics of ordinary shares, except for the point stating 'Ordinary shares issue is a source of internal finance available to a business.' Typically, when a company issues shares (ordinary or otherwise), the capital received is considered external finance as it comes from investors (shareholders) who are external parties as opposed to any internal operations or retained earnings of the company.

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