Question

Which of the following characteristics is not associated with ordinary shares?

cumulative dividends.

residual claim on income and assets.

vote by proxy. limited liability.

Answer 1

Solution : Cumulative dividends is the characteristic not associated with Ordinary Shares.

Reason : Cumulative dividends are characterstic of Preference Shares. This dividend must be paid before any other dividends paid to common shareholders.

Other choices are incorrect due to the below reasons:

Residual claim on income and assets - This is a Characteristic of Ordinary shares; wherein they have the right to company's residual profits after all the claims have been made.

Vote by proxy - This is a Characteristic of Ordinary shares; where they come with Voting rights

Limited liability -  This is a Characteristic of Ordinary shares; wherein the losses are limited only to extent of shares held or amount invested with the company.