Participating preferred stock will:
A) share with common stock in excess earnings after preferred payments and specified payments to common stock.
B) accumulate dividends that will be paid later.
C) participate in earnings only to the extent that all other classes do.
D) participate in earnings to the same extent as common stock.

Question

Quizplus · Accepted Answer

Participating preferred stock allows holders to share in the earnings of the company beyond the fixed preferred dividend. After the preferred dividends are paid, and specified payments are made to common stock, participating preferred stock can receive additional dividends, often based on the company's performance. This is different from cumulative preferred stock, which accumulates unpaid dividends (option B), or other forms of preferred stock that might only participate to a limited extent (options C and D).

Participating Preferred Stock Will