Owners of these kinds of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be…

Question

Owners of these kinds of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before the dividend can be paid in respect of equity shares. They also enjoy priority over the equity shareholders in payment of surplus.

Accepted Answer

## Model Answer **(a) Preference shares** — Their owners receive a fixed dividend before equity shareholders and have priority over equity shareholders in payment of surplus. ## Explanation The question describes two key features: fixed/priority dividend and priority in surplus payment — both are classic characteristics of **preference shares**. Eliminate other options: bonus shares are free shares issued to existing shareholders, right shares are offered to existing shareholders at a discount, and equity shares carry variable dividends with no such priority.

Financial Market Management — CBSE Class 10 board question