If a preferred stock issue is cumulative,this means:
A)unpaid preferred stock dividends are paid at the end of the year.
B)unpaid preferred stock dividends are legally binding on the corporation.
C)unpaid preferred stock dividends must be paid in the future before common stock dividends can be paid.
D)unpaid preferred stock dividends are never repaid.

Question

Quizplus · Accepted Answer

If a preferred stock issue is cumulative, it means that any unpaid preferred stock dividends accumulate and must be paid in the future before any common stock dividends can be paid. Therefore, option C is the correct choice. The other options are incorrect because they do not accurately describe the characteristics of cumulative preferred stock.

If a Preferred Stock Issue Is Cumulative,this Means