Cumulative preference shares are those preference shares which earn the right to receive arrears of dividend before a dividend is paid to the equity shareholders.
For example, a company has 10,000. 8% of preference shares of Rs 100 each and dividend for the years 20013-2014 which has not been paid up. Now the company has earned sufficient profits in 2015. Now the company shall pay Rs 2,40,000 as a dividend for three years to the preference shareholders.
