Stock for which any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends is known as ________ stock.

Question

Quizplus · Accepted Answer

Cumulative preferred stock requires any missed dividend payments to be accumulated and paid to preferred shareholders before common shareholders can receive any dividends. This means that if a company misses paying a dividend to preferred shareholders in one year, it must make up for it in future years before any dividends can be paid to common shareholders. Noncumulative preferred stock does not have this feature, as missed dividends do not accumulate in the future. Common stock is the basic stock issued by a company, while participating preferred stock allows preferred shareholders to receive additional dividends on top of their preferred dividend if the company exceeds certain profit thresholds.

Stock for Which Any Missed Dividend Payments Must Be Paid