Noncumulative definitions
| Word backwards | evitalumucnon |
|---|---|
| Part of speech | Adjective |
| Syllabic division | non-cu-mu-la-tive |
| Plural | The plural of the word "noncumulative" is noncumulative. |
| Total letters | 13 |
| Vogais (5) | o,u,a,i,e |
| Consonants (6) | n,c,m,l,t,v |
In finance, noncumulative refers to a type of preferred stock that does not accrue any unpaid dividends. This means that if dividends are not paid in a particular period, they do not accumulate or carry over to future periods. Noncumulative preferred stock shareholders only receive dividends if they are declared by the company's board of directors for that specific period.
Characteristics of Noncumulative Preferred Stock
Noncumulative preferred stock is considered less favorable to investors compared to cumulative preferred stock, where any missed dividend payments must be paid before common shareholders receive dividends. Noncumulative stockholders do not have the right to claim any missed dividends in the future if the company does not declare them. This type of stock is often issued when a company wants to provide dividends only during profitable periods.
Advantages and Disadvantages
One advantage of noncumulative preferred stock is that it allows companies more flexibility in managing their dividend payments. During financially challenging times, a company can choose not to pay dividends without accumulating a debt of unpaid dividends to its noncumulative shareholders. However, this lack of obligation to pay missed dividends can be a disadvantage for investors seeking a consistent income stream from their investments.
Investors considering noncumulative preferred stock should carefully weigh the pros and cons before making investment decisions. Understanding how noncumulative stock functions within a company's dividend policy and financial health is crucial to assessing the risks and potential returns associated with this type of investment.
Noncumulative Examples
- The noncumulative effect of taking a single dose of pain medication wore off quickly.
- The company offers noncumulative bonuses to employees based on individual performance.
- The noncumulative nature of the insurance policy meant that unused benefits did not roll over to the next year.
- Investors were drawn to the noncumulative preferred stock because of its fixed dividend payments.
- The noncumulative voting system allowed shareholders to cast all of their votes for a single candidate.
- The noncumulative nature of the savings account meant that interest was only calculated on the principal balance.
- The artist's noncumulative approach to creating art involved starting each piece from scratch.
- The noncumulative discount can only be used once and does not carry over to future purchases.
- The noncumulative system of grading meant that each exam score was considered independently of previous scores.
- His noncumulative memory allowed him to focus on the present moment without being weighed down by the past.