What type of preferred share is entitled to dividends above its specified dividend if the common shares receive excess dividends and must receive dividends in arrears before the common dividends can be declared?
A)Cumulative and participating
B)Cumulative and nonparticipating
C)Redeemable and participating
D)Redeemable and cumulative

Question

Quizplus · Accepted Answer

The preferred share described is both cumulative (meaning any missed dividends must be paid before common dividends can be declared) and participating (meaning it is entitled to receive additional dividends beyond its specified amount if common shares receive excess dividends). The share is not described as redeemable, so options C and D can be eliminated. The preferred share is also not described as nonparticipating, so option B can be eliminated. Therefore, the correct answer is A.

What Type of Preferred Share Is Entitled to Dividends Above