Which of the following is true about cumulative dividends for preference shares?

Cumulative dividends for preference shares are typically characterized by the requirement that if any dividends are not paid in a specific period, they accumulate and must be paid in future periods before any dividends can be distributed to ordinary shareholders. This means that when a company is liquidated or profits are available for distribution, preference shareholders with cumulative dividends are prioritized, ensuring they receive their owed dividends before ordinary shareholders.

This explains why the statement regarding their payment order in relation to ordinary dividends is correct. Cumulative preference shares give their holders a preferential claim on dividends, which must be settled before ordinary distribution.

The other statements have inaccuracies: preference shares are not paid last during liquidations; they have a set priority. They are not optional; the cumulative feature signifies that missed payments accumulate and must be settled eventually. Preference shares also usually have a fixed rate, distinguishing them from ordinary shares which may have variable dividends.