If the amount of dividend paid varies according to the level of profit; what type of share is involved?
Answer Details
If the amount of dividend paid varies according to the level of profit, then the type of share involved is an "ordinary share."
Ordinary shares are also known as common shares, and they represent the basic ownership of a company. Ordinary shareholders have the right to vote at company meetings and receive dividends, but the amount of dividends paid can vary depending on the company's profits. This means that if a company makes a higher profit, it may pay a higher dividend to its ordinary shareholders. Conversely, if the company makes a lower profit, the dividend paid to the ordinary shareholders may be lower or even zero.
In contrast, preference shares are a type of share that pays a fixed dividend, regardless of the company's profits. Therefore, if the dividend paid varies according to the level of profit, it is most likely an ordinary share.