Missed dividends on cumulative preferred shares:

Question

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Missed dividends on cumulative preferred shares are referred to as dividends in arrears. They remain a liability of the corporation until they are paid and must be paid before any dividends can be paid to common shareholders. The preferred shareholders are entitled to receive all of the missed dividends before any dividends can be paid to the common shareholders. However, if the corporation does not have enough funds to pay all of the missed dividends, they may choose to pay a portion of the dividends or nothing at all, in which case the dividends in arrears are forever lost by the preferred shareholders.

Missed Dividends on Cumulative Preferred Shares