Dividends in arrears cannot exist in conjunction with
A) callable preferred stock.
B) convertible preferred stock.
C) noncumulative preferred stock.
D) cumulative preferred stock.

Question

Quizplus · Accepted Answer

Dividends in arrears can only exist in conjunction with cumulative preferred stock. Cumulative preferred stock requires that any missed dividend payments be accrued and paid out before any dividends can be paid to common shareholders. Noncumulative preferred stock does not have this requirement, so dividends in arrears are not possible with this type of stock. Callable and convertible preferred stock have no impact on the possibility of dividends in arrears.

Dividends in Arrears Cannot Exist in Conjunction with