Edison Power and Light has an outstanding issue of cumulative preference shares with an annual fixed dividend of $2.00 per share.It has not paid the preferred dividend for the last three years, but intends to pay a dividend on the ordinary shares in the coming year.Before Edison can pay a dividend on the ordinary shares

Question

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Since the shares are cumulative preference shares, Edison Power and Light must pay the accumulated dividends for the past three years ($2.00 per year for 3 years) plus the current year's dividend before it can pay dividends on ordinary shares, totaling $8.00 per share.

Edison Power and Light Has an Outstanding Issue of Cumulative