Chapter4Q - the company. (d) A rights issue of shares has...

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Financial accounting for decision makers (5th edition) Atrill and McLaney Exercise Chapter 4 You have recently overheard the following statements: (a) “When a company’s shares are traded on the Stock Exchange and the current market price is above the nominal value of the shares, this excess is recorded by the company in the share premium account.” (b) “A ‘reserve’, in the context of company accounts, is an amount of cash that can legally be used to a pay a dividend to shareholders.” (c) “A bonus issue is a way of rewarding shareholders for their long­term loyalty to
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Unformatted text preview: the company. (d) A rights issue of shares has this name because it arises when the companys unpaid lenders exercise their right under the law to require the shareholders to contribute new share capital to provide funds to meet those claims. (e) A public limited company is one that is owned by the government, whereas a private limited company is one that is owned by the Stock Exchange Required: Comment critically on each of these statements....
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