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    Question

    The class of preference share, where the arrears in the

    dividends are carried forward and paid out of the profits of the subsequent years are called as:
    A Convertible preference shares Correct Answer Incorrect Answer
    B Redeemable preference shares Correct Answer Incorrect Answer
    C Cumulative preference shares Correct Answer Incorrect Answer
    D Participating preference shares Correct Answer Incorrect Answer

    Solution

    Cumulative preference shares have a special feature that allows any unpaid dividends to accumulate and be paid out of the profits of future years, if and when the company has sufficient profits. If the company is unable to pay dividends in a particular year or if it pays only a part of the dividend due, the unpaid amount is carried forward to subsequent years, and it accumulates until it is paid in full.

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