Noncumulative preferred stock means that ________.
A)the fixed dividend amount accumulates from year to year.The entire amount of all past unpaid dividends must be paid to the preferred shareholders before any dividends can be paid to common shareholders
B)the board of directors has the option to decide whether past unpaid dividends will be paid to preferred shareholders
C)preferred dividends accumulate as earnings accumulate
D)the balance in the Preferred stock account is increased by any additional shares that are sold during the year

Question

Quizplus · Accepted Answer

Noncumulative preferred stock does not accumulate unpaid dividends from year to year. If the board of directors does not declare a dividend in a given year, shareholders of noncumulative preferred stock do not have the right to claim those missed dividends in the future. This contrasts with cumulative preferred stock, where missed dividends accumulate and must be paid out before dividends can be distributed to common shareholders.

Noncumulative Preferred Stock Means That ________