When there is no profit in one year or the profit of a company is not enough to pay the fixed dividend on preference shares, the arrears of dividend are to be carried forward and paid before a dividend is paid on the ordinary shares. This is called:

When there is no profit in one year or the profit of a company is not enough to pay the fixed dividend on preference shares, the arrears of dividend are to be carried forward and paid before a dividend is paid on the ordinary shares. This is called Cumulative preference shares. Cumulative preference shares are those shares on which dividend goes on accumulating (adding). Non-cumulative describes a type of preferred stock that does not entitle investors to reap any missed dividends. By contrast, “cumulative” indicates a class of preferred stock that indeed entitles an investor to dividends that were missed.