Non-cumulative means that common shareholders must be paid for dividends in arrears before preferred shareholders are paid.

Question

Quizplus · Accepted Answer

Non-cumulative means that if the company did not pay dividends in previous periods, the preferred shareholders are not entitled to receive those missed dividends in the future. Therefore, there are no dividends in arrears that need to be paid before paying preferred shareholders.

Non-Cumulative Means That Common Shareholders Must Be Paid for Dividends