Cumulative preferred stock gives its owners a right to be paid both the current and all prior periods' unpaid dividends befor paid to common stockholders. True or False True False
Cumulative preferred stock gives its owners a right to be paid both the current and all prior periods' unpaid dividends befor paid to common stockholders. True or False True False
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![### Cumulative Preferred Stock and Dividend Rights
#### True or False
**Statement:**
Cumulative preferred stock gives its owners a right to be paid both the current and all prior periods' unpaid dividends before any dividends are paid to common stockholders.
- [True]
- [False]
---
**Explanation:**
Cumulative preferred stock contains a feature that requires the issuing company to pay all dividends, including those that were omitted in the past, to preferred shareholders before making any dividend payments to common shareholders. This ensures that preferred shareholders receive their expected dividends, even if the company faces financial difficulties or cash flow issues in specific periods.
Use this statement as a knowledge check or quiz question to test your understanding of the rights associated with cumulative preferred stock in corporate finance.
**Interactive Component:**
Select "True" or "False" to confirm your understanding of the statement above.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F25310e27-d02e-4900-871a-4bca6692b57f%2Fb8ee96e7-3e6f-4d1d-9656-603737d3d3c7%2F0p8b8bh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Cumulative Preferred Stock and Dividend Rights
#### True or False
**Statement:**
Cumulative preferred stock gives its owners a right to be paid both the current and all prior periods' unpaid dividends before any dividends are paid to common stockholders.
- [True]
- [False]
---
**Explanation:**
Cumulative preferred stock contains a feature that requires the issuing company to pay all dividends, including those that were omitted in the past, to preferred shareholders before making any dividend payments to common shareholders. This ensures that preferred shareholders receive their expected dividends, even if the company faces financial difficulties or cash flow issues in specific periods.
Use this statement as a knowledge check or quiz question to test your understanding of the rights associated with cumulative preferred stock in corporate finance.
**Interactive Component:**
Select "True" or "False" to confirm your understanding of the statement above.
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