The Order in Which Dividends Are Allocated to Common and Preferred

question 74

Multiple Choice

The order in which dividends are allocated to common and preferred shares depends upon the provisions in the respective stock contracts.Choose the correct statement regarding this allocation.

• A)When noncumulative preferred shares are fully participating, the rate of dividends allocated to preferred shares is the ratio of total par of preferred shares outstanding to total par of both classes of shares outstanding.
• B)When 8% cumulative preferred shares are participating to a total of 12%, any arrear dividends are ignored in the allocation since they pertain to a previous year.
• C)When noncumulative preferred shares are not participating, the rate of dividends to common shares are limited to the ratio of total par of common shares outstanding to total par of both classes of shares outstanding.
• D)When 8% noncumulative preferred shares are participating to a total of 12%, the preferred shares must receive all arrear dividends and 12% of total preferred shares par outstanding prior to common shares receiving any dividends.

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Definitions:

Endodermis

The deepest layer of cells within a plant root's cortex, acting as a selective filter that controls the movement of materials from the soil into the vascular core.

Epidermis

The outermost layer of cells in plants and animals, serving as a protective barrier against the environment.

Cortex

The outer layer of an organ or structure, such as the cerebral cortex of the brain, which is involved in various high-level functions including memory, attention, perception, awareness, thought, language, and consciousness.

Photosynthetic Stem

Stems that are capable of photosynthesis, allowing plants to produce food in places other than their leaves.