Answer:
Ans. Different types of preference shares are discussed below: (a) Cumulative and Non-cumulative: The preference shares which enjoy the right to accumulate unpaid dividends in future years if it is not paid during a year are termed as cumulative preference shares. On the contrary, a non-cumulative preference share is one in which dividend is not accumulated if it is not paid in the particular year. (b) Participating and Non-participating Preference Shares: Those preference shares which have a right to participate in further surplus of a company's shares which after dividend at certain rate has been paid on equity shares are called participating preference shares. Those preference shares which do not have a right to participate in further surplus of a company's shares which after dividend at certain rate has been paid on equity shares are called non-participating preference shares. (c) Convertible and Non-convertible Preference Shares: Those preference shares which can be converted into equity shares within a specified period of time are called convertible preference shares. On the contrary, preference shares which cannot be converted into equity shares within a specified period of time are called non- convertible preference shares.
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