Which of the following is the correct description of dividends in arrears, as it applies to cumulative preferred stock?
A)the cumulative amount of dividends that were not paid in previous years
B)the cumulative amount of dividends that were paid in previous years
C)the amount of dividends that were paid late
D)the amount of dividends that will be paid in the coming year

Question

Quizplus · Accepted Answer

Dividends in arrears refer to the cumulative amount of dividends that were not paid in previous years. This concept applies specifically to cumulative preferred stock, where dividends must be paid out in full to preferred shareholders before common shareholders can receive any dividends. If a company does not pay dividends to preferred shareholders in a given year, those dividends are considered to be in arrears and must be made up at a later time.

Which of the Following Is the Correct Description of Dividends