If a Preferred Stock Is of the Cumulative Type

question 30

Multiple Choice

If a preferred stock is of the cumulative type

• A) dividends must be paid on an equal basis with common so long earnings permit.
• B) dividends cannot be passed if they are earned.
• C) the cumulative voting rule applies in the exercise of the voting privilege.
• D) unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common shareholders.

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Definitions:

Substantial Evidence

Evidence that is adequate to support a conclusion or justify a decision, often used in legal and regulatory contexts to indicate a reasonable level of proof.

Hindsight Bias

The tendency to believe, after an event has occurred, that one would have predicted or expected the outcome, often referred to as the "I-knew-it-all-along" phenomenon.

Self-fulfilling Prophesy

A prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior.

Rationalization

A defense mechanism where logical, acceptable explanations are given for behaviors that are actually driven by subconscious motives.