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

Question

Quizplus · Accepted Answer

Dividends in arrears on cumulative preferred shares must be paid before any dividends can be distributed to common shareholders. This ensures that preferred shareholders receive their agreed-upon dividends before common shareholders are allocated any earnings.

Dividends in Arrears on Cumulative Preferred Shares