Canadian Securities Course (CSC) Practice Exam

What are cumulative dividends?

1. Delayed floater preferred

2. Convertible preferreds

3. Retractable preferreds

4. preferred dividends that accumulate from year to year until paid (in arrears)

The correct answer is: preferred dividends that accumulate from year to year until paid (in arrears)

Cumulative dividends refer to preferred dividends that accumulate from year to year until paid (in arrears). This means that if the company is unable to pay dividends in a certain year, the missed dividends will accumulate until they are able to make the payment in the future. A Delayed floater preferred, B: Convertible preferreds, and C: Retractable preferreds do not pertain to cumulative dividends, as they are different types of preferred stock with their own unique characteristics. It is important to understand the distinctions between these types of preferred stock in order to make informed investment decisions.