Sem 4 Assignment 2

Assignment 2 Question 1 1. The maintenance of peachy precept is developed to prohibit a family from reducing its get by capital because a reduction in capital would reduce the pool of funds available to the company to pay its creditors. variance 254T provides that dividends be only payable out of salarys. This provision ensures that capital is non return to shareholders in the form of dividend. The term profit is not defined in the Corporation Act. In Re Spanish Prospecting Co Ltd (1911), it was stated profits implies a affinity between the states of a business at 2 special(prenominal) dates usually by an interval of a year which marrow the gain made by the business during the year. Section 259A prohibits a company directly acquiring its own shares. However, there are exceptions where: (a) The buy-back of a share is in accordance with s 257A; (b) The buy-back is chthonic a court order; (c) A company takes shelter everywhere its shares under approved employee share scheme. 2. The dividend on customary shares is uncertain and variable (high when the company does well, poor or non-existent when it does badly). taste sensation shareholders get a wintry dividend which, if not paid, usually accrues until it batch be. Each ordinary share usually carries a right to vote right.

Preference shares do not usually carry a voting right unless dividends fall into arrears. In the event of a winding up, preference shares are usually repayable at par value, and rank above the claims of ordinary shareholders (but behind beach and trade creditors). Preference shares may be issued with the right of transformation into ordinary shares. These are called convertibles. Two advantages of equity finance over debt finance: (a) The company only pays dividends if it has profits available and the issue forth distributed can be divided by the directors. (b) The company does not have to pay interest and low gearing which enables the company to operate without the fear of inability to meet its debt obligations. 3. A fixed charge... If you want to get a full essay, order it on our website: Orderessay

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