Which of the following statements is true regarding preferred stock?
A) shareholders are guaranteed an annual dividend
B) shareholders will receive a dividend if common stockholders are paid
C) dividends in arrears are a current liability
D) dividends in arrears are either a current or long-term liability, depending upon when the corporation last declared a dividend

Question

Quizplus · Accepted Answer

Preferred stockholders have a priority claim on dividends over common stockholders. However, they only receive a dividend if the common stockholders have been paid. Dividends in arrears are not a liability; they represent accumulated dividends that were not paid in previous periods.

Which of the Following Statements Is True Regarding Preferred Stock