Cima F2 Exam Question No 5

Question No 5:

What is the Different types of preference shares? 

• cumulative preference shares, for which dividends must be paid including skipped dividends i.e. if a dividend is skipped one year, the skipped dividend has to be paid the following year along with the 'normal' dividend.
• non-cumulative preference shares, for which skipped dividends do not have to be paid later.
• participating preference shares, which give the holder fixed dividends plus extra earnings based on certain conditions (in a similar way to ordinary shares).
• convertible preference shares, which can be exchanged for a specified number of ordinary shares on some given future date.