A dividend preference for preferred shares means that
A)Preferred shareholders are allocated their dividends before any dividends are allocated to common shareholders
B)Preferred shareholders are guaranteed dividend
C)Dividends are paid quarterly
D)Only preferred shareholders will receive dividends
E)All of these

Question

Quizplus · Accepted Answer

A dividend preference for preferred shares means that preferred shareholders are allocated their dividends before any dividends are allocated to common shareholders. This does not guarantee dividends for preferred shareholders, but it does mean that they get paid first when dividends are distributed. Dividends may be paid quarterly, but this is not necessarily related to the preferred share dividend preference. Option D is incorrect, as it suggests that only preferred shareholders will receive dividends, which is not true; common shareholders may receive dividends as well, but after preferred shareholders have been paid.

A Dividend Preference for Preferred Shares Means That