Chapter 5 Multiple-choice questions

. Which of the following is true of ordinary shares?

They entitle their owners to receive a fixed rate of dividend.

They are often redeemable at a future date.

Ordinary dividends unpaid in one year are usually cumulative.

The ordinary shareholders are repaid last if the company is wound up.

. Which of the following is true of preference shares?

The amount of dividend payable is not fixed.

The preference dividend has to be paid before the ordinary dividend can be paid.

Preference shareholders are usually offered security on their investment.

The preference dividend must be paid every year.

. If Hegarty Ltd has issued 250,000 £1 ordinary shares and an ordinary dividend of 5 pence per share is paid, the dividend paid would be:

£12,500.

£250,000.

£125,000.

£50,000.

. A company with limited funds wishes to pay preference dividends, debenture interest and ordinary dividends during a financial year. In what order should the company plan to make the payments?

Ordinary dividend, preference dividend, debenture interest.

Preference dividend, debenture interest, ordinary dividend.

Debenture interest, preference dividend, ordinary dividend.

Debenture interest, ordinary dividend, preference dividend.

. Which of the following is not true of a stock exchange?

It is a market where shareholders can sell their shares.

It is a market where shareholders can buy shares.

It is a place where companies can be formed.

It is a market where new shares can be issued.

. Which of the following is a characteristic of a debenture?

Debentures entitle their owners to receive a fixed rate of dividend.

Debentures are long-term loans.

Debenture holders are never provided with security for their loan.

Debenture holders are owners of the company.

. Which of the following is not a source of funding for a company?

An issue of ordinary shares.

Profits retained in the business.

An increase in the company's share price.

A debenture issue.

. Blanc plc has 200,000 4% £1 preference shares and 600,000 £1 ordinary shares in issue. If the company pays an ordinary dividend of 6 pence per share during the year ended 31 December 2023, the total dividends payable that year would be:

£68,000.

£36,000.

£8,000.

£44,000.

. Twisters Ltd paid debenture interest of £210,000 on 6% debentures. Assuming no debenture issue was made during the year, what is the amount of debentures in issue during the year?

£12,600,000

£210,000

£2,857,143

£3,500,000

. Twisters Ltd paid a preference dividend of £30,000 on 600,000 £1 preference shares. What rate of dividend attaches to the preference shares, assuming the full preference dividend was paid during the year?

3%

5%

20%

50%

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