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Question
Dividend on equity shares is paid out of the profits ______ paying interest on debentures and ______ dividend on preference shares.
Options
Before, before
After, before
Before, after
After, after
Solution
Dividend on equity shares is paid out of the profits after paying interest on debentures and after dividend on preference shares.
Explanation:
Dividends on equity shares are paid out of the residual profits left after paying interest on debentures and dividends on preference shares. Similarly, equity shareholders are paid at the company's winding up after all debts and preference shareholders have been paid in full.
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