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

question 60

Multiple Choice

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

• A) They both receive dividends in arrears.
• B) 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.
• C) Cumulative does not receive dividends but noncumulative does.
• D) 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.

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Definitions:

Scientific Attitude

A mindset characterized by skepticism, open-mindedness, and the reliance on empirical evidence and systematic observation for understanding phenomena.

Skepticism

An attitude of doubt or a disposition to incredulity either in general or toward a particular object.

Hindsight Bias

The tendency to perceive events as having been predictable after they have already occurred.

Exaggerate

To describe something in a way that makes it seem larger, better, worse, or more important than it actually is.