CISI Introduction To Securities And Investment Practice Exam

The key idea is how ordinary and preference shares differ in rights and income. Ordinary shareholders are owners who usually have voting rights at general meetings and face the residual risk of the company’s performance, meaning their dividends aren’t fixed and they’re last to be paid if the company is wound up. Preference shareholders, on the other hand, typically receive a fixed dividend and have priority over ordinary shareholders for dividends and in liquidation, and they often do not have voting rights (though some preference shares can vote in certain circumstances). The statement that best contrasts these features is the one that links voting rights and residual risk with fixed dividends and possible lack of voting rights. The other options rely on absolutes or incorrect generalizations about redeemability or fixed dividends, so they don’t fit the usual characteristics.