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Difficulty: EasyPublic Limited Companies: Characteristics, Stock Listing, and Securities

Which type of security issued by a public limited company entitles its holders to voting rights at general meetings and dividends that vary according to company profitability?

  1. A
    Debentures
  2. Ordinary sharesAnswer
  3. C
    Preference shares
  4. D
    Treasury bills

Answer

Ordinary shares
Ordinary shares represent the equity ownership of a public limited company. Holders of ordinary shares are the risk-bearers of the business, granting them full voting power at shareholder meetings and claims to variable dividends declared from annual net profits.

Step-by-Step Solution

1
Identify the nature of ownership and rights requested in the question
The target security must offer voting rights and variable dividend returns based on profit performance.
These features distinguish equity risk capital from fixed-income or debt securities.
2
Evaluate corporate securities issued by public limited companies
Ordinary shareholders are the ultimate owners who bear the financial risks, hold voting powers at general meetings, and receive residual profits as variable dividends.
Other securities like debentures and preference shares have fixed returns and lack general voting rights.

Key Concept

Securities and ownership characteristics of Public Limited Companies
Estimated Time:45s
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Topics

Public Limited Companies: Characteristics, Stock Listing, and Securities

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