SIE practice questionmediumPreferred Stock - Cumulative
A company skips two years of dividend payments on its cumulative preferred stock. The next time it pays a dividend, which must occur?
- AMissed dividends are forfeited.
- BOnly one year's preferred dividend is paid.
- CCommon shareholders are paid first.
- DAll missed preferred dividends must be paid before common stockholders receive any dividends.✓ Correct answer
Explanation
Why D — All missed preferred dividends must be paid before common stockholders receive any dividends.
Cumulative preferred dividends accumulate and must be paid first. The other options incorrectly state or reverse the order of payments.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Equity Securities questions
- A shareholder owns 100 shares at $60 each. After a 3-for-2 split, how many shares will the shareholder have and what…
- Which of the following is correct regarding cash dividends on common stock?
- What is the status of voting rights and dividend eligibility for treasury stock?
- An investor owns 5% of a company’s shares. The company issues preemptive rights during a new offering. What is the…