If a Preference Share Dividend Cannot Be Paid in a Particular

question 22

Multiple Choice

If a preference share dividend cannot be paid in a particular year and will then accrue as a liability until the funds are available,the preference shares are known as:

• A) cumulative preference shares
• B) participating preference shares
• C) non-participating preference shares
• D) redeemable preference shares

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Definitions:

Contribution Margin Ratio

The ratio that represents what percentage of sales contributes to the covering of fixed costs, calculated by subtracting variable costs from sales revenue and dividing the result by sales revenue.

Operating Income

Earnings from a company's core business operations, excluding revenue and expenses from non-operating activities like investments.

Variable Costs

Costs that vary depending on a company’s level of activity.

Break-even Sales

The amount of revenue from sales needed to cover a company's fixed and variable costs, resulting in zero net income.