B为什么不正确

问题如下：

Question Which of the following is most accurate concerning key characteristics of different types of preference shares?

选项：

A.The price of convertible preference shares tends to be more volatile than their underlying common shares because they do not allow investors to share in profits of the company. B.Preference shareholders rank above subordinated bondholders with respect to claims on the company’s net assets upon liquidation. C.Preference shares have characteristics of both debt and equity securities.

解释：

Solution

C is correct. Preference shares have characteristics of both debt securities and common shares. Similar to interest payments on debt securities, the dividends on preference shares are fixed but not contractual obligations. Similar to common shares, preference shares can be perpetual and can pay dividends indefinitely.

A is incorrect. The price of convertible preference shares is less volatile than their underlying common shares because there is less uncertainty about future cash flows as dividend payments are known and more stable. In addition, convertible preference shares allow investors the opportunity to share in the profits of the company.

B is incorrect. Both common and preference shareholders are owners of the company and will have claims on assets after liabilities to all creditors including bondholders have been completely paid. Preference shareholders rank before common shareholders but after bondholders to receive net distributions.