If the Preferred Stock of a Corporation Is Cumulative

question 105

Multiple Choice

If the preferred stock of a corporation is cumulative:

• A)Dividends on preferred stock are guaranteed.
• B)Dividends cannot be declared in an amount less than that stated on the stock certificate.
• C)Preferred stockholders participate in dividends paid in excess of a stated amount on the common shares.
• D)Dividends in arrears must be paid on preferred stock before any dividend can be paid on common stock.

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Definitions:

Projected Sales

An estimate of the amount of sales that a company expects to achieve in a future period.

Expected Cash Receipts

The anticipated amount of money a business expects to receive over a certain period, often from sales or services.

Budgeted Balance Sheet

A projection of a company's financial position at a future point in time, showing expected values for assets, liabilities, and equity.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.