Question : Assertion-Reason Questions: Chapter - Sources of Business Finance
Questions : Equity Shares and Preference Shares
Assertion: Equity shareholders have ownership rights but limited voting power.
Reason: Equity shareholders are entitled to receive fixed dividends every year.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Both assertion and reason are false.
Correct Answer: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
The assertion is true. Equity shareholders indeed have ownership rights in a company, which means they have a claim on the company's assets and earnings. However, their voting power can be limited depending on the company's structure and the number of shares they hold.
The reason is false. Unlike preferred shareholders who are typically entitled to receive fixed dividends, equity shareholders (common shareholders) do not have a guaranteed or fixed dividend. Dividends for equity shareholders are decided by the company's board of directors and are subject to the company's profitability and dividend policy.
Reason:
Question : Questions : Equity Shares and Preference Shares
Statement 1: Equity shareholders have ownership rights and voting power in company decisions.
Statement 2: Equity shareholders do not receive any dividends.
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