Question

________ preferred shares contain a provision requiring that preferred shareholders share ratably in distributions with common...

________ preferred shares contain a provision requiring that preferred shareholders share ratably in distributions with common shareholders.
A) Cumulative
B) Participating
C) Convertible
D) Redeemable

Homework Answers

Answer #1

The correct answer is

B) Participating

Explanation

In the participating preferred shares, the prefernce shares and common shares the dividend and amount on distribution ratably based irrespective of priority of payment to prefernce dividends.These prefernce shares have a right to receive over fixed dividend rate based on the dividend paid to commonshareholders. The remaining all options are incorrect as cummulative preferance shares refers to the shares in which the unpaid dividend gets accumulated and convertible shares are those which can be converted into equity shares and redeemabke preferrence shares are the shares which can be reedemed in cash. The other 3 types of preference shares does not have the option of ratably distribution. So the correct answer is Participating Preferrence shares

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