When preferred stock is cumulative, preferred dividends not paid in a year are:

Question

Quizplus · Accepted Answer

When preferred stock is cumulative, preferred dividends not paid in a year are considered dividends in arrears. This means that they accumulate and must be paid in the future before any common stock dividends are paid. They are not considered distributions of earnings, but rather a liability of the company to its preferred stockholders. They will eventually be paid to the preferred stockholders unless the company goes bankrupt.

When Preferred Stock Is Cumulative, Preferred Dividends Not Paid in a Year