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CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process

Compared with common shareholders, holders of cumulative preference shares are most likely entitled to:

Cumulative preference shareholders are most likely entitled to have unpaid dividend arrears settled before any common dividend is paid. Preference shares typically have fixed dividends and limited voting rights, so they do not receive unlimited residual profits.

  1. ADividend arrears being paid before common dividendsCorrect
  2. BVoting rights on all matters at each meeting
  3. CAn unlimited share of residual profits

Explanation

Cumulative preference shares carry forward unpaid dividends, and the accumulated arrears must be paid before any common dividend. Preference shares usually have limited or no voting rights and a fixed dividend, so they do not share unlimited residual profits.

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