The following instruction relates to Question 13

Merga Bien Ltd issues redeemable preference shares. The shares carry a cumulative. 2%% dividend.

The shares are redeemable for cash if the company makes an accounting profit in am eat. Mera

Bien Ltd is highly proftable for the past 10 years. However, Merga had a huge loss in the 2020-2021

period due to the COVID challenges. Merga pays ordinary dividends at a yield of about 3% ammaly

without fail for the past 10 years. The market interest rate for the long-term debit at the time the

preference shares were issued was 5% p.a.

Required:

Given this senario, explain whether Merga Bien has a financial liability, Note you are not required to calculate