Commerce Exam > Commerce Questions > Which of the following statements is false?a)...
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Which of the following statements is false?
- a)A company can redeem its preference shares
- b)Preference shareholders are creditors of a company
- c)The part of the authorized capital which can be called up only in the event of liquidation of a company is called reserve capital
- d)Capital redemption reserve can be utilized for issuing fully paid bonus shares
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
Which of the following statements is false?a)A company can redeem its ...
False Statement: Preference shareholders are creditors of a company.
Explanation:
- Statement A: A company can redeem its preference shares.
- This statement is true. Companies have the option to redeem their preference shares, usually after a specified period.
- Statement B: Preference shareholders are creditors of a company.
- This statement is false. Preference shareholders are not considered creditors of a company. They are considered as owners of the company, although their rights may be different from common shareholders.
- Statement C: The part of the authorized capital which can be called up only in the event of liquidation of a company is called reserve capital.
- This statement is true. Reserve capital refers to the portion of authorized capital that can only be called up and paid in the event of the company's liquidation.
- Statement D: Capital redemption reserve can be utilized for issuing fully paid bonus shares.
- This statement is true. The capital redemption reserve can be utilized for various purposes, including issuing fully paid bonus shares.
In conclusion, the false statement is Statement B: Preference shareholders are creditors of a company.
Explanation:
- Statement A: A company can redeem its preference shares.
- This statement is true. Companies have the option to redeem their preference shares, usually after a specified period.
- Statement B: Preference shareholders are creditors of a company.
- This statement is false. Preference shareholders are not considered creditors of a company. They are considered as owners of the company, although their rights may be different from common shareholders.
- Statement C: The part of the authorized capital which can be called up only in the event of liquidation of a company is called reserve capital.
- This statement is true. Reserve capital refers to the portion of authorized capital that can only be called up and paid in the event of the company's liquidation.
- Statement D: Capital redemption reserve can be utilized for issuing fully paid bonus shares.
- This statement is true. The capital redemption reserve can be utilized for various purposes, including issuing fully paid bonus shares.
In conclusion, the false statement is Statement B: Preference shareholders are creditors of a company.
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Which of the following statements is false?a)A company can redeem its ...
Preference Shareholders are Creditors of a Company:
Preference shareholders are not considered creditors of a company. Unlike creditors who lend money to a company and expect repayment with interest, preference shareholders are part-owners of the company. They have a fixed claim on the company's profits and assets, but they do not have the same legal rights as creditors in terms of repayment priority in case of liquidation.
Explanation:
- Preference shareholders are investors who hold preference shares issued by a company.
- These shares come with a fixed dividend that needs to be paid before any dividend can be distributed to equity shareholders.
- Preference shareholders have a higher claim on the company's assets compared to equity shareholders in the event of liquidation.
- However, they do not have the same legal standing as creditors who are owed money by the company.
- Creditors have a higher priority in terms of repayment in case of liquidation compared to preference shareholders.
Therefore, the statement that preference shareholders are creditors of a company is false.
Preference shareholders are not considered creditors of a company. Unlike creditors who lend money to a company and expect repayment with interest, preference shareholders are part-owners of the company. They have a fixed claim on the company's profits and assets, but they do not have the same legal rights as creditors in terms of repayment priority in case of liquidation.
Explanation:
- Preference shareholders are investors who hold preference shares issued by a company.
- These shares come with a fixed dividend that needs to be paid before any dividend can be distributed to equity shareholders.
- Preference shareholders have a higher claim on the company's assets compared to equity shareholders in the event of liquidation.
- However, they do not have the same legal standing as creditors who are owed money by the company.
- Creditors have a higher priority in terms of repayment in case of liquidation compared to preference shareholders.
Therefore, the statement that preference shareholders are creditors of a company is false.
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Which of the following statements is false?a)A company can redeem its preference sharesb)Preference shareholders are creditors of a companyc)The part of the authorized capital which can be called up only in the event of liquidation of a company is called reserve capitald)Capital redemption reserve can be utilized for issuing fully paid bonus sharesCorrect answer is option 'B'. Can you explain this answer?
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ample number of questions to practice Which of the following statements is false?a)A company can redeem its preference sharesb)Preference shareholders are creditors of a companyc)The part of the authorized capital which can be called up only in the event of liquidation of a company is called reserve capitald)Capital redemption reserve can be utilized for issuing fully paid bonus sharesCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice Commerce tests.
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