CMA Study Group

Activity Measures and Financing | Subunit 3: Long-Term Financing

  • 1.  Activity Measures and Financing | Subunit 3: Long-Term Financing

    Posted 15 days ago


    can someone explain the sentence in the answer ( underlined italic)

    The following excerpt was taken from a company's financial statements:  " . . . 10% convertible participating . . . $10,000,000."  What is most likely being referred to?
    Answer (A) is correct.
    Preferred shareholders have priority over common shareholders in the assets and earnings of the entity. If preferred dividends are cumulative, any past preferred dividends must be paid before any common dividends. Preferred shares may also be convertible into common shares, and it may be participating. For example, 10% fully participating preferred shares will receive additional distributions at the same rates as other shareholders if dividends paid to all shareholders exceed 10%.


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    Tayba Al-Mehdar
    Analyst
    Khobar
    Saudi Arabia
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