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Good luck! The module team Question 13 Which of the following statements is NOT true about ordinary shares: Ordinary shareholders are not entitled to a fixed rate of dividends. Ordinary shareholders receive dividends only after lenders and preference shareholders have received their interest and dividends. The potential gains for ordinary shareholders are unlimited. Ordinary shareholders expect a low rate of return as their investments are considered less risky in comparison to preference shareholders and lenders

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The module team
Question 13
Which of the following statements is NOT true about ordinary shares:
Ordinary shareholders are not entitled to a fixed rate of dividends.
Ordinary shareholders receive dividends only after lenders and preference shareholders have received their interest and dividends.
The potential gains for ordinary shareholders are unlimited.
Ordinary shareholders expect a low rate of return as their investments are considered less risky in comparison to preference shareholders and lenders

Good luck! The module team Question 13 Which of the following statements is NOT true about ordinary shares: Ordinary shareholders are not entitled to a fixed rate of dividends. Ordinary shareholders receive dividends only after lenders and preference shareholders have received their interest and dividends. The potential gains for ordinary shareholders are unlimited. Ordinary shareholders expect a low rate of return as their investments are considered less risky in comparison to preference shareholders and lenders

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SummerMaster · Tutor for 5 years

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Statement 4 is not true about ordinary shares.

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## Step1:<br />We must identify the nature of an ordinary shareholder.<br /><br />Ordinary shareholders, also known as common shareholders, are classically the lowest order in the priority ladder when it comes to claims on company assets and earnings.<br /><br />## Step2: <br />For the first statement, regarding the payment of dividends to ordinary shareholders, it's known that ordinary shareholders lack the guarantee to receive dividends hence the truth as dividends to this category is usually flexible and uncertain due to business results and decisions of the board of directors.<br /><br />## Step3: <br />The second statement indicates that ordinary shareholders receive dividends only after priorities such as loans or preference dividends have been settled, this is an accurate representation since the interest on loans, and the dividends from preference shares are usually settled before ordinary shareholders can partake in any leftover dividends.<br /><br />## Step4: <br />The third passage illustrates ordinary shareholder’s probability of gains in the company, as true because, given the highly risky nature of their investment, they have the potential to make incredibly high (unlimited) returns if the company performs exceptionally well.<br /><br />## Step5:<br />Contrarily, the fourth statement suggests ordinary shareholders anticipate a modest return due their investment being considered less risky – this is false. This kind of investment internalizes massive risk due to its character as regarded last in settling creditors should the company becomes insolvent. Hence, their returns may vary widely, neither necessarily having a floor a low expectation nor ceiling barring an extensive acquisition gained.<br /><br />### \(True\ Statements = Statement\ 1, Statement\ 2\ and\ Statement\ 3 \)<br />### \(False\ Statement = Statement\ 4 \)
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