Not Paying the Dividends on a Cumulative Preferred Issue May

question 14

Multiple Choice

Not paying the dividends on a cumulative preferred issue may result in:

• A) preferred dividend arrears that can be eliminated by the common shareholders only after common dividends are paid.
• B) additional voting rights are granted to common stockholders if dividends are in arrears.
• C) full payment of dividends to common shareholders.
• D) both preferred dividend arrears that can be eliminated by the common shareholders only after common dividends are paid; and additional voting rights are granted to common stockholders if dividends are in arrears.
• E) both voting rights are granted to preferred stockholders if preferred dividends are in arrears; and no payment of dividends to common shareholders.

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Definitions:

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A designated column in spreadsheets or financial documents used to record and calculate costs incurred.