What preferential rights are enjoyed by preference shareholders. Explain.
Preference shareholders enjoy a preferential position over equity shareholders in two main ways. Firstly, they have the right to receive a fixed rate of dividend out of the net profits of the company. This dividend is paid before any dividend is declared for the equity shareholders.
Secondly, preference shareholders enjoy a preferential right regarding the repayment of capital. At the time of liquidation, they receive their capital after the claims of the company's creditors have been settled. This ensures their capital is returned before the equity shareholders are paid.
Explanation
The answer is derived directly from the textbook context which explicitly lists the two preferential rights: (i) receiving a fixed rate of dividend before equity shareholders, and (ii) receiving capital after creditors but before equity shareholders during liquidation. The answer adheres to the word count and formatting rules for a 3-mark short answer question.