The common stockholders receive dividends only if the total dividend is large enough to pay the preferred stockholders first.

Question

Quizplus · Accepted Answer

Preferred stockholders have priority over common stockholders when it comes to receiving dividends. If the company does not have enough profits to pay both preferred and common dividends, preferred stockholders must be paid first, and any remaining amount is paid to the common stockholders. Therefore, common stockholders only receive dividends if the total dividend is large enough to cover the preferred stockholders' payments.

The Common Stockholders Receive Dividends Only If the Total Dividend