Question

Definition of cumulative convertible preference shares

Answer 1

CUMULATIVE PREFERENCE SHARES

The cumulative preference shares are those which are assured of the dividends every year even if there are no profits in a particular year. If in a particular year there are no profits to pay the dividends , the unpaid dividend of such preference shares is treated as arrear and is carried forward to the subsequent years . Thus, the unpaid dividend goes on accumulating and is paid when theere are sufficient profits in the subsequent years.

CONVERTIBLE PREFERENCE SHARES

The convertible preference shares are those which can be converted into equity shares within a certain period i.e., the holders of such shares have right to convert their shares into equity shares.