Question
Question 4 Which of the following is NOT a feature of ordinary shares: Businesses are legally obliged to pay regular dividends to their ordinary shareholders. Investments in ordinary shareholders are risky for the investors, and therefore they will normally expect a relatively high rate of return. Ordinary shareholders control the business through their voting rights, which give them the power to elect the directors and to remove them from office. Ordinary shares issues is a source of external finance that forms the backbone of a business's capital structure. Ordinary shareholders receive a dividend only after lenders and preference shareholders have received their interest payments or dividends. 3 pt
Answer
4.2
(399 Votes)
Orville
Advanced · Tutor for 1 years
Answer
"Businesses are legally obliged to pay regular dividends to their ordinary shareholders" is NOT a feature of ordinary shares.
Explanation
## Step1: Understand each given statement and match each with the characteristic property of the ordinary shares. The ordinary (also known as equity) shareholders are the owners of the company. They have the potential risk and creating reward proposition. ## Step2: We must identify one which is incorrect among the following characteristics of ordinary shares:“Businesses are legally obliged to pay regular dividends to their ordinary shareholders” - This statement is not a tendency feature of ordinary shares. Indeed, the dividends for ordinary shareholders are never ensured."Investments in ordinary shareholders are risky for the investors, and therefore they will normally expect a relatively high rate of return." These shareholders undertake the risk for the opportunity of limitless returns, which might be achieved by investors."Ordinary shareholders control the business through their voting rights, which give them the power to elect the directors and to remove them from office." One of the significant advantages for the ordinary division investors is, in fact, the business voting rights."Ordinary shares issues is a source of external finance that forms the backbone of a business's capital structure." - Issuing equity is generally a model strategy to bring in extra cash for business. "Ordinary shareholders receive a dividend only after lenders and preference shareholders have received their interest payments or dividends." - Only if any income remains after any obligation owed and the dividend for preference investors have been unique, then ordinary shareholders will get their payment. Hence, they consistently rank last in the accommodation orders.