Which of the following statements pertaining to preferred shares is correct?

Question

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Non-cumulative preferred shares do not have dividends in arrears, meaning if a dividend is not paid in a certain year, it is not owed to the shareholders in future years. A is incorrect because participating preferred shares may receive a share of the net income in future years as well, not just the current year's net income. C is incorrect because whether a subsidiary is fully owned or not does not determine if the preferred shares are participating. D is incorrect because if the company does not have enough profits to pay participating preferred shares, dividends in arrears can occur.

Which of the Following Statements Pertaining to Preferred Shares Is