Assuming That There Are No Dividends in Arrears, How Are

question 304

Multiple Choice

Assuming that there are no dividends in arrears, how are total dividends allocated between ordinary shares and preference shares?

• A) Preference shareholders are paid their required annual dividend with the balance going to ordinary shareholders.
• B) On the basis of their relative par values.
• C) On the basis of their relative market values.
• D) Cannot be determined with the information given.

---

Definitions:

Commodity Money

Currency that possesses inherent worth and serves functions beyond simply facilitating trade, like gold or silver.

Monetary Policy

The process by which a central bank controls the supply of money in an economy, primarily through interest rates, to maintain price stability and achieve high employment.

100-Percent-Reserve Banking

A banking system where banks are required to keep the full amount of each depositor's funds in reserve, meaning they cannot lend out any of the money deposited.

Fractional Reserve Economy

An economic system where banks hold a portion of customers' deposits in reserve and lend out the remainder, thus creating money.