BCL – L1 – SA – Q64 – Types of Capital

When preference capital dividends are paid.

Question

When the dividend on preference capital is paid?

A whenever profits

B only if there are profits

C even if there are no profits

D only when the directors suggest and recommend it

Answer

Explanation:
The correct answer is D because dividends on preference shares are typically paid when the board of directors recommends and declares them, subject to the company’s profits and policies. While profits are often required (B), the decision rests with the directors, making D more precise. Option C is incorrect as dividends usually depend on profits, and A is too vague.

Tags: Company Law, Dividend Payment, Preference Shares
Level: Level 1

Topic: Types of capital and the financing of companies

Uploader: Samuel Duah