If a Preferred Stock Is of the Cumulative Type

question 54

Multiple Choice

If a preferred stock is of the cumulative type,

• A) dividends must be paid on an equal basis with common stock, so long as earnings permit.
• B) dividends cannot be passed if they are earned.
• C) dividends must be paid, and if not a liability is created.
• D) unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders.

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Definitions:

Personal Property

Tangible, movable objects.

Uniform Commercial Code

A comprehensive set of laws governing all commercial transactions in the United States.

Perfection

The series of legal steps a secured party takes to protect its right in the collateral from the other creditors who want their debt returned through the same collateral.

Security Interest

A legal claim or right granted over property to secure the payment of a debt or obligation.