Canadian Securities Course (CSC) Level 1 Practice Exam

What are participating and deferred preferreds?

1. Shares with no specified dividend

2. Shares with voting rights

3. Shares with earnings rights above their dividend

4. Shares with voting and dividend rights

The correct answer is: Shares with earnings rights above their dividend

Participating and deferred preferred shares are types of shares that have earnings rights above their dividend. Participating preferred shares entitle shareholders to receive additional dividends beyond the specified rate if the company achieves a certain level of profitability. Deferred preferred shares receive their dividends only after all other preferred and common shareholders have been paid. Both types of shares offer unique features related to dividend entitlement based on the company's financial performance, making them different from shares with no specified dividend, shares with voting rights, or shares with both voting and dividend rights.