Freddy has received a gift from his family on his eighteenth birthday of 10,000 shares in Ace Pharmaceuticals Ltd. 5,000 of these shares are ordinary shares and the other 5,000 shares are 10% preference shares. This is Freddy's first time that he owns shares in a company and he wants some advice about the two types of shares in Ace Pharmaceuticals Ltd.

Required: Explain to Freddy:

i) What are Ordinary Shares and Preferences Shares? (3 marks) ANSWER i):

ii) The payment of dividends to a shareholder who owns Ordinary Shares and Preference Shares (4 marks)