Preference Shares
Class of shares with priority over ordinary shares for dividends/asset distribution.
Formula
Preference Dividend = Face Value × Fixed Dividend Rate
Real World
When Lloyds Banking Group issued preference shares, holders received a fixed 6.475% dividend each year before ordinary shareholders received anything, making them attractive to risk-averse investors.
Exam Focus
Contrast preference shares with ordinary shares on dividend certainty and voting rights — this distinction is a common 'compare' question trap.
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