Dividends in Arrears on Cumulative Preferred Stock

question 10

Multiple Choice

Dividends in arrears on cumulative preferred stock

• A)never have to be paid, even if common dividends are paid.
• B)must be paid before common stockholders can receive a dividend.
• C)should be recorded as a current liability until they are paid.
• D)enable the preferred stockholders to share equally in corporate earnings with the common stockholders.

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Definitions:

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Representativeness Heuristic

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The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

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