The chairman of a public limited company has written his annual report to the shareholders , extract of which is quoted below:

"As a measure of confidence in our ability to expand operations in 2013 and 2014, and to provide the necessary financial base, we issued $0.5 million 8% Redeemable Loan Capital, 2007/2013, 20 million 6% $1 Redeemable Preference shares and 4 million $1 Ordinary shares. The opportunity was also taken to redeem the whole of the 5 million 11% Redeemable Preference shares"

Required:

Answer the following questions on the above extract

(1)  In the description of the loan capital, what is the significance of a.    8%? b.   2007/2013

(2)  In the description of the preference share issue, what is the significance of  c. 6% d. Redeemable?

(3) Contrast the accounting treatment in the company's income statement of the interest due on the loan capital with dividends proposed on the ordinary shares.

Answer rating: 100% (QA)

1 In the description of the loan capital a The significance of 8 is that it represents the interest ... View the full answer