Before a company can pay dividends to the common shareholders, the owners of non-cumulative preferred shares must receive:

Question

Quizplus · Accepted Answer

Non-cumulative preferred shares do not accumulate unpaid dividends. This means that if the company did not pay the dividend in a given year, the shareholders do not have any claim to it in the future. Therefore, non-cumulative preferred shareholders are only entitled to the current year's dividend and not any dividends in arrears.

Before a Company Can Pay Dividends to the Common Shareholders