Dividends in arrears that must be paid to the preferred stockholders before payment of dividends to common stockholders are

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Cumulative dividends in arrears means that if a company fails to pay the preferred dividends for any reason, those dividends accumulate and must be paid before any dividends can be paid to the common stockholders. This ensures that preferred stockholders receive their dividends before the common stockholders. Noncumulative dividends do not accumulate and are only paid if the company declares a dividend in that specific period. Participating dividends give preferred stockholders the right to share in additional dividends beyond their normal preferred rate based on a predetermined formula, and convertible dividends allow preferred stockholders to convert their shares to common stock.

Dividends in Arrears That Must Be Paid to the Preferred