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Question 6 Which of the following is NOT a feature of ordinary shares: Ordinary shareholders are not entitled to a fixed rate of dividends. 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 The potential losses for ordinary shareholders are limited to the amount that they have invested in the company. So their downside risk is limited 3 pts

Question

Question 6
Which of the following is NOT a feature of ordinary shares:
Ordinary shareholders are not entitled to a fixed rate of dividends.
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
The potential losses for ordinary shareholders are limited to the amount that they
have invested in the company. So their downside risk is limited
3 pts

Question 6 Which of the following is NOT a feature of ordinary shares: Ordinary shareholders are not entitled to a fixed rate of dividends. 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 The potential losses for ordinary shareholders are limited to the amount that they have invested in the company. So their downside risk is limited 3 pts

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AderynMaster · Tutor for 5 years

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The statement - 'Ordinary shares issue is a source of internal finance available to a business' is NOT a feature of ordinary shares.

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## Step1: <br />Observe each listed feature and analyze whether they truly characterize ordinary shares in a corporation. <br /><br />## Step2: <br />Understanding ordinary shares – also known as common shares, provide the holder with a proportionate share in the corporation's profits and losses. But they do not promise any preset dividends, and dividends only get paid out if the company can afford it after covering its operational expenses, including all debt obligations, to sustain their business position and long-term growth prospects. Hence, this feature is true about ordinary shareholders' financial situations. <br /><br />## Step3: <br />A times, business organization may rely on issuing ordinary shares to get the required funds, as it does not entail any compulsion about making routine payments like loans, making it a cheaper source of finance for the company, especially when seeking flexibility on profit distributions is a foremost priority.<br /><br />## Step4: <br />The investors who hold ordinary shares are the real owners, as they have paid a specific price to acquire these shares. Their risk situation gets confined up to the amount they initially paid to purchase the shares, and no demands upon any liabilities that the company incurs will burden them in future should it run into financial difficulties. Therefore, their downside risk is circumscribed, vindicating as a feature representing ordinary shares' essentials. <br /><br />## Step5: <br />Ordinary shares issuance does not fundamentally characterise as an internal source of finance, instead describes an external source, which a business utilizes to fund its project investments, particularly intended for growth and expansion pursuits, accruing to improving its market parameters on scales and scope of corporate footprint. Programs associated with internal finance would generally entail methods including retained profits, debt collection or acquiring internal administrative cost efficiencies compiled as cumulative savings obtained over time. Recognize this feature as contradiction access from internal financings usually refers.
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