SIE practice questionmediumPreferred Stock
A company skips its preferred dividend payment for two years and then resumes payments. Which type of preferred shareholders will receive all missed dividends before common shareholders can be paid?
- AParticipating preferred
- BConvertible preferred
- CCumulative preferred✓ Correct answer
- DCallable preferred
Explanation
Why C — Cumulative preferred
Cumulative preferred shareholders must receive past missed dividends before any common dividends. The other types do not guarantee payment of skipped dividends.
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