Final answer:
Preferred stock that does not accumulate dividends in years when they are not declared is called non-cumulative preferred stock. Shareholders receive dividends proportionally based on the number of shares they own, reflecting a percent of the company's profits.
Step-by-step explanation:
Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as non-cumulative preferred stock. This type of stock differs from cumulative preferred stock, where missed dividends are accumulated and must be paid out before dividends can be paid to common shareholders. When a company pays a dividend, it is distributing a percent of the profits it has earned to its shareholders. The amount received is proportional to the number of shares owned.