Nearly all preferred stock comes with the right to receive all past unpaid dividends before common shareholders can receive any dividends. This right is referred to as:

Question

Quizplus · Accepted Answer

The term "cumulative" refers to the fact that if a company doesn't pay dividends in a given year, those dividends accumulate (or "cumulate") and must be paid before any dividends can be paid to common shareholders. This is a common feature of preferred stock, and it is designed to provide income stability to preferred shareholders. The other answer choices are not accurate descriptions of this feature.

Nearly All Preferred Stock Comes with the Right to Receive