4.1 Comment on the following quote:

‘Limited companies can set a limit on the amount of debts that they will meet. They tend to have reserves of cash as well as share capital, and they can use these reserves to pay dividends to the shareholders. Many companies have preference shares as well as ordinary shares. The preference shares give a guaranteed dividend. The shares of many companies can be bought and sold on the Stock Exchange. Shareholders selling their shares can represent a useful source of new finance to the company.’