Answers for Tutorial Questions due Week 8

Answers for Tutorial Questions due Week 8 - Answers for...

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Answers for Tutorial Questions due Week 8 9.1 Describe the major differences between ordinary shares and preference shares. Ordinary shares Preference shares Dividends Variable Fixed Dividends Not cumulative May be cumulative Voting rights Yes Mostly no Ranking for dividends Last First Claim to assets in liquidation Last (traditionally) Second last 9.2 Why are convertible securities more attractive to investors than simply holding a firm’s preference shares or corporate bonds? Depends on investors’ needs. Convertible securities behave like debt – fixed return, no capital appreciation or loss, but can be converted into shares later (perhaps when company has proved to be successful). Thus, holders retain the opportunity to convert to ordinary shares and share in successes, but enjoy a lower initial risk situation than with direct purchase of shares. 9.3 Explain why the Sons of Gwalia case is potentially important to financiers and investors. Firstly, if shareholders are to be considered as unsecured creditors in insolvencies, the
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Answers for Tutorial Questions due Week 8 - Answers for...

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