Dividends in arrears on cumulative preferred stock
A)never have to be paid, even if common dividends are paid.
B)must be paid before common stockholders can receive a dividend.
C)should be recorded as a current liability until they are paid.
D)enable the preferred stockholders to share equally in corporate earnings with the common stockholders.

Question

Quizplus · Accepted Answer

Dividends in arrears on cumulative preferred stock must be paid before any dividends can be distributed to common stockholders. This ensures that preferred stockholders receive their due dividends before any profits are shared with common stockholders.

Dividends in Arrears on Cumulative Preferred Stock