When a company issues preferred stock with a cumulative feature, any time it skips a preferred dividend in one quarter, the amount it owes the next quarter is equal to the dividend for that quarter plus the dividend it skipped in the previous quarter.

Question

Quizplus · Accepted Answer

This is correct, as preferred stock with a cumulative feature means that any missed dividends accumulate and must be paid before any common stock dividends can be paid. Therefore, if a company skips a preferred dividend in one quarter, it will owe the dividend for that quarter plus any missed dividends from previous quarters.

When a Company Issues Preferred Stock with a Cumulative Feature