If a preferred stock is of the cumulative type,
A)dividends must be paid on an equal basis with common stock, so long as earnings permit.
B)dividends cannot be passed if they are earned.
C)the cumulative voting rule applies in the exercise of the voting privilege.
D)unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders.

Question

Quizplus · Accepted Answer

If a preferred stock is of the cumulative type, unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders. This means that even if the company does not pay dividends in a particular period, the unpaid amount will accumulate and must be paid before any dividends can be paid to common stockholders.

If a Preferred Stock Is of the Cumulative Type