Which of the Following Statements Is True When Dividends Are

question 98

Multiple Choice

Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?

• A) The shareholders must be allowed to convert their shares to common stock.
• B) The unpaid dividends are accrued as a liability.
• C) The unpaid dividends are reported in a note to the financial statements.
• D) The unpaid dividends accrue interest until paid.

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Definitions:

Interest Expense

The expense that an entity faces for borrowing money over a specific duration.

Proceeds

The total amount of money received from a sale or transaction.

Debt-To-Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, calculated as total liabilities divided by shareholders' equity.

Financing Structure

The mix of debt and equity that a company uses to finance its operations and growth.