Asked by Alexis Singleton on Jul 26, 2024
Verified
A cumulative dividend is defined as a dividend that is:
A) Carried forward as an arrearage if not paid.
B) Payable only if current operations generate sufficient cash in a year to pay the dividend.
C) Paid only to senior holders of common stock.
D) Treated as an interest expense.
E) Paid as an extra payment if the share of stock is called.
Cumulative Dividend
A feature of preferred stock that mandates the payment of any missed dividends before dividends can be distributed to other shareholders.
Arrearage
A legal term for the part of a debt that is overdue after missing one or more required payments.
- Acquire knowledge about the attributes and privileges of diverse stock types, including common and preferred stocks.
Verified Answer
VG
Vishal GoyalJul 27, 2024
Final Answer :
A
Explanation :
Cumulative dividends are characteristic of preferred stock, where if dividends are not paid in any year, they accumulate and must be paid out before any dividends can be paid to common stockholders. This ensures that preferred shareholders receive their dividends before common shareholders in any distribution of dividends.
Learning Objectives
- Acquire knowledge about the attributes and privileges of diverse stock types, including common and preferred stocks.