17 Views

Question : What does the term "cumulative" mean in relation to preference shares?

Option 1: The right to vote in company meetings
  

Option 2: The obligation of the company to pay accumulated dividends
  

Option 3: The option for shareholders to convert preference shares into equity shares

 

Option 4: The requirement to pay a fixed dividend on preference shares


Team Careers360 22nd Jan, 2024
Answer (1)
Team Careers360 25th Jan, 2024

Correct Answer: The obligation of the company to pay accumulated dividends
  


Solution : The correct answer is (b) The obligation of the company to pay accumulated dividends.

When preference shares are described as "cumulative," it means that the company has an obligation to pay accumulated or unpaid dividends on the preference shares in the future before paying dividends to equity shareholders. Cumulative preference shares have a feature that ensures any unpaid dividends from previous periods accumulate and must be paid to shareholders before dividends can be distributed to other shareholders. When preference shares are described as "cumulative," it means that the company has an obligation to pay accumulated or unpaid dividends on the preference shares in the future before paying dividends to equity shareholders.

 

Related Questions

UPES B.Tech Admissions 2026
Apply
Ranked #43 among Engineering colleges in India by NIRF | Highest Package 1.3 CR , 100% Placements
UPES Integrated LLB Admission...
Apply
Ranked #18 amongst Institutions in India by NIRF | Ranked #1 in India for Academic Reputation by QS Rankings | 16 LPA Highest CTC
Presidency University MBA Adm...
Apply
NAAC A+ Accredited | Highest CTC 10 LPA | Top Recruiters : Amazon, Accenture, KPMG, EY, Capgemini & many more
Nirma University Law Admissio...
Apply
Grade 'A+' accredited by NAAC | Ranked 33rd by NIRF 2025
UPES M.Tech Admissions 2026
Apply
Ranked #45 Among Universities in India by NIRF | 1950+ Students Placed 91% Placement, 800+ Recruiters
UPES | BBA Admissions 2026
Apply
#36 in NIRF, NAAC ‘A’ Grade | 100% Placement, up to 30% meritorious scholarships
View All Application Forms

Download the Careers360 App on your Android phone

Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile

150M+ Students
30,000+ Colleges
500+ Exams
1500+ E-books