Question

What is the difference between nonparticipating and participating preferred stock?

Answer 1

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Answer:

In participating preferred stock, after dividend has been paid to the common shareholders, holders of participating preference stock have the right to participate in the remaining profits of the company. If in any operating year, the organization has surplus profits then the participating preferred stockholders are entitled to receive more dividends in addition to their fixed preference dividends whereas in : Preference shares which do not have the right to participate in the profits remaining after equity shareholders have been paid dividend whereas in Non Participating Preferred stock, shareholders do not have the right to participate in the profits remaining after common equity shareholders have been paid dividends.