Identify six ways in which a company could make preference shares more attractive to a potential investor.

CPA-Financial-Management-Section-3 Revision kit

The shares could be made more attractive in the following ways:
• The shares could be „convertible preference shares‟, allowing the holders to have a chance to convert it into equity shares.
• The shares could be cumulative so that dividends cannot be paid any one year, the preference shareholder will still have the possibility of receiving previous periods dividends when funds are available.

• The company could offer a high rate of dividends on the shares a rate well above the interest yield on fixed interest securities.
• The preference shares could be made redeemable.
• The preference shares could be of the participating kind, entitling the holder to participate in further share of the profits after they have received their fixed percentage
• Dividends rate.

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