Which one of the following statements concerning preferred stock is correct?
A)Unpaid preferred dividends are a liability of the firm whether or not they have been declared.
B)Preferred shareholders may be granted voting rights if preferred dividend payments remain unpaid.
C)Any unpaid preferred dividends will accrue interest at a rate equal to the dividend rate.
D)All unpaid dividends on both cumulative and noncumulative preferred stock must be paid before any common stock dividends can be declared.
E)Preferred dividends will be paid quarterly only when the firm has current net income that exceeds the amount of the quarterly dividend.

Question

Quizplus · Accepted Answer

Preferred shareholders typically do not have voting rights under normal circumstances. However, if preferred dividends are unpaid for a certain period (which varies by the terms of the preferred stock), the shareholders may be granted voting rights until the dividends are paid. This is a mechanism to protect the interests of preferred shareholders.

Which One of the Following Statements Concerning Preferred Stock Is