SIE practice questioneasyPreferred Stock – Cumulative
A cumulative preferred stockholder is entitled to:
- AMissed dividends from prior years before common dividends are paid✓ Correct answer
- BVoting rights in proportion to shares owned
- CRedemption at book value on demand
- DParticipation in additional company profits
Explanation
Why A — Missed dividends from prior years before common dividends are paid
Cumulative preferred shareholders must be paid all unpaid dividends before any dividends can go to common shareholders. They do not typically have voting rights, guaranteed redemption, or participation in extra profits.
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