If a preferred stock is of the cumulative type dividends must be paid on an equa
ID: 2648246 • Letter: I
Question
If a preferred stock is of the cumulative type
dividends must be paid on an equal basis with common, so long as earnings permit.
dividends cannot be passed if they are earned.
the cumulative voting rule applies in the exercise of the voting privilege.
unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders.
A.dividends must be paid on an equal basis with common, so long as earnings permit.
B.dividends cannot be passed if they are earned.
C.the cumulative voting rule applies in the exercise of the voting privilege.
D.unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders.
Explanation / Answer
Correct Answer:
D.
unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders.
Explanation:
Preferred stocks are those stocks who own the property of both equity and debts. Owner of preferred stocks are paid dividends but it is a fixed dividend. A preferred stock with cumulative characteristics means that if dividend is not paid in one period then it will be accumulated and paid in coming subsequent periods. This payment is done before paying anything (dividend) to ordinary shareholders.
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