Question

Holders of common stock must be aware of possible restrictions on common dividends when preferred stock is

Convertible
	2) Callable
	3) Noncumulative
	4) Cumulative

Answer 1

Holders of Common stock must be aware of possible restrictions on common dividends when the preferred stock is Cummulative. Explanation is as follows:

1) In case of cumulative preferred stock the company must keep track of the dividend which it has decided not to pay its preferred shareholders. In case later on it decides to start paying dividends again then cummulative preferred shareholders must get all their previous missed dividend payments before any payment is made to the common shareholders.

2) In case of non cummulative preferred stock the shareholders have no future right to receive dividends that the company chooses not to pay . If the company starts making regular scheduled preference dividends again , it only has to become current. Then it can start paying common stock holders also if it desires.

3) Convertible preference shares are those shares that can be exchanged for a pre determined number of company common stock shares at the discretion of the investor. If not converted as far as dividend rights are concerned they enjoy the rights as available to the normal preferred stock.

4) In case of Callable Preferred Stock these are a type of preferred stock in which the issuer has the right to call back or redeem the stock at a preset price after a defined date. As regards dividends callable preferred stock enjoys the same rights as are available to normal preferred stock.