What Is the Difference Between Cumulative and Non-Cumulative Preferred Shares

question 125

Multiple Choice

What is the difference between cumulative and non-cumulative preferred shares?

• A) Cumulative preferred share's right to receive dividends is forfeited in any year that dividends are not declared. However, noncumulative preferred shares' undeclared dividends accumulate each year until paid.
• B) Cumulative does not receive dividends but noncumulative does.
• C) They both receive dividends in arrears.
• D) Cumulative preferred shares' undeclared dividends accumulate each year until paid, while non-cumulative preferred shares' right to receive dividends is forfeited in any year that dividends are not declared.

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Definitions:

Restricted

Limited or confined within certain parameters, boundaries, or conditions, often imposed by external factors or regulations.

Coercive Power

The ability to compel or force someone to act in a certain way through threats, punishments, or control measures.

Legitimate Power

A form of authority that stems from an individual's role or position within an organization, allowing them to influence others based on their formal standing.

Expert Power

The ability to influence others based on the possession of knowledge, skills, or experience that others value.