If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders?

Question

Quizplus · Accepted Answer

Cumulative, participating preferred stock will receive a fixed dividend regardless of the amount of dividends declared. However, if the company does well and declares dividends that exceed a specified amount, participating preferred stockholders will share in the excess dividends in proportion to their ownership. Therefore, option B is the correct choice. Option A is incorrect because cumulative preferred stockholders are entitled to any skipped dividends, which will accumulate until the company declares dividends. Option C is incorrect because it only refers to fixed dividends, which is not the case for participating preferred stock. Option D is incorrect because it is referring to convertible preferred stock, which is not the same as cumulative, participating preferred stock.

If a Corporation Issues Cumulative, Participating Preferred Stock, Which of the Following