Which of the following describes preference shares?

Preference shares are a type of equity security that has specific characteristics distinguishing them from ordinary shares. They typically come with features such as fixed-rate dividends, which are paid at a predetermined rate before dividends are distributed to ordinary shareholders. This fixed dividend is an important aspect of preference shares, as it provides a more stable return on investment compared to the variable dividends of ordinary shares.

Additionally, preference shares often have priority in terms of liquidation rights. This means that in the event of a company's liquidation, preference shareholders are paid out before ordinary shareholders, which reduces their risk compared to ordinary equity holders. This combination of fixed dividends and priority in liquidation makes preference shares an appealing option for investors seeking a blend of income and lower risk.

The other options do not accurately capture the essential nature of preference shares. For example, while preference shares may have limited or no voting rights, this isn’t a defining feature and can vary among companies. Similarly, stating that dividends are paid after ordinary shares is incorrect, as preference shareholders receive their dividends prior to any distributions made to ordinary shareholders. Lastly, while all investments carry a degree of risk, preference shares are typically considered less risky compared to ordinary shares because of their fixed dividends and priority treatment, contrary to the assertion that they offer the highest