Shares in the question refers to the shares of joint stock
company. These shares are of two basic types - preferential shares and ordinary shares -
depending upon the rights of voting in matters related to management of the company, and
of receiving dividend. Preferential shares get a preference over the ordinary shares in
receiving dividend. However, the preferential shares do not carry any voting rights. The
preferential shares receive dividends at a fixed rate, while ordinary stocks receive
dividends that is decided from time to time this dividend can be lower or higher than
the fixed dividend on the preferential shares. However dividend on ordinary shares can
be paid only after that on preferential shares has been
paid.
The preferential shares are of two types cumulative
and non-cumulative. For non-cumulative preferential shares, no dividend is payable on
them when company makes no profit. In the cumulative preferential shares the dividend is
payable in all years, irrespective of profit or loss made by the company. However, when
the company makes a loss the dividend is not paid immediately. It is paid in subsequent
years when the company makes profit. No dividend can be paid on ordinary shares till the
total amount of cumulative dividend due is paid on the cumulative preferential
shares.
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