Hank owns 100 shares of cumulative preferred stock in Wayside Transport,Inc.Kelsey owns 50 non-cumulative preferred shares,and Oleg owns 120 shares of common stock.Wayside does not pay dividends in 2015.In 2019
A)Hank and Kelsey must receive their 2019 dividends before Oleg is paid any 2019 dividends.
B)Oleg cannot receive any 2019 dividends until Hank is paid for the 2015 dividends.
C)Kelsey cannot receive the dividends Wayside could not afford to pay in 2015.She will just lose them.
D)All of these are correct.

Question

Quizplus · Accepted Answer

Hank's cumulative preferred shares mean he's entitled to dividends missed in previous years before common shareholders like Oleg are paid. Kelsey's non-cumulative preferred shares do not entitle her to back dividends for years when payments were missed, such as 2015. Thus, all statements are correct regarding the dividend payment priorities and the nature of cumulative and non-cumulative preferred shares.

Hank Owns 100 Shares of Cumulative Preferred Stock in Wayside