Failure to pay a preference dividend signals to the market that the company is in serious financial trouble.

Question

Quizplus · Accepted Answer

Preference dividends are dividends paid to preferred shareholders before common shareholders. Failure to pay these dividends may indicate that the company is unable to meet its financial obligations and may signal financial distress to the market. This can result in a decline in the company's stock price and possibly lead to a decrease in investor confidence.

Failure to Pay a Preference Dividend Signals to the Market