Question 1 (Marks: 10)

According to IAS33 Earnings per share there are two types of shareholder, namely ordinary shareholders and preference shareholders.

Q.1.1 Why do we call them preference shares or shareholders? Explain what advantages for the shareholder this implies. (5)

Q.1.2 If an entity has issued cumulative redeemable preference shares to the market, discuss what effects this will have on the liabilities that the company will report in their financial statements. (5)