When preferred stock is cumulative, preferred dividends not declared in a period are

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When preferred stock is cumulative, any unpaid preferred dividends from previous periods are referred to as dividends in arrears and must be paid before any common stock dividends can be paid. They are not considered a liability, as they do not need to be immediately paid, but they can accumulate until they are paid. They are also not distributions of earnings, as they are owed to the preferred stockholders specifically.

When Preferred Stock Is Cumulative, Preferred Dividends Not Declared in a Period