Page 57 - DLIS104_MANAGEMENT OF LIBRARIES AND INFORMATION CENTRES

Management of Libraries and Information Centres

Notes Since they do not carry voting rights, preference shares avoid diluting the control of
existing shareholders while an issue of equity shares would not.
Unless they are redeemable, issuing preference shares will lower the company’s gearing.
Redeemable preference shares are normally treated as debt when gearing is calculated.
The issue of preference shares does not restrict the company’s borrowing power, at least in
the sense that preference share capital is not secured against assets in the business.
The non-payment of dividend does not give the preference shareholders the right to
appoint a receiver, a right which is normally given to debenture holders.
However, dividend payments on preference shares are not tax deductible in the way that interest
payments on debt are. Furthermore, for preference shares to be attractive to investors, the level of
payment needs to be higher than for interest on debt to compensate for the additional risks.

Notes For the investor, preference shares are less attractive than loan stock because:
they cannot be secured on the company’s assets
the dividend yield traditionally offered on preference dividends has been much
too low to provide an attractive investment compared with the interest yields on
loan stock in view of the additional risk involved.

Self Assessment

Fill in the blanks:
1. .................... are issued to the owners of a company.
2. .................... provides a way of raising new share capital by means of an offer to existing
shareholders inviting them to subscribe cash for new shares in proportion of their existing
holdings.
3. .................... have a fixed percentage dividend before any dividend is paid to the ordinary
share holders.

8.2 Budgeting Procedure and Accounts
While budgeting is truly a year-round activity, its development can be broken down into various
stages. The process begins with individual program review. Each department within the University
reviews and evaluates the effectiveness of their program with respect to the mission and strategic
plan of the University. During this planning stage, meetings are held between the Budget Committee
of the University and some program directors to discuss these reviews and identify opportunities for
program enhancements. Budget requests are then submitted to respective Vice Presidents for approval
and then forwarded to the Vice President of Business Affairs for inclusion in the first draft of the
budget. The Budget Committee meets several times to project revenues for the ensuing year and to
determine departmental funding levels in balancing the budget. The budget is adopted by the
governing board at its May meeting, as a preliminary annual budget, effective July 1. This preliminary
budget is revised when enrollment figures for the fall semester have been confirmed and is approved
by the board in October as the final budget. After spring enrollment numbers are determined, if
needed, the budget is revised to accommodate any variance in projected enrollment numbers.

Administration

Each program administered by the University is divided into various departments, each headed
by a department chair responsible for budget compliance. All expenses incurred by the University
are requested at the departmental level and approved by the respective Department Chair and/or
Vice President (depending on spending limits) for whom they report, before payment is processed.
Payments are recorded in the general ledger at the departmental level, providing comparison
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