Which of the following is a correct statement about cumulative and noncumulative preferred stock?
A)They both receive dividends in arrears.
B)Cumulative stock's undeclared dividends accumulate each year until paid while noncumulative stock's right to receive dividends is forfeited in any year that dividends are not declared.
C)Cumulative preferred stock is guaranteed to receive its dividends.
D)Cumulative preferred stock's right to receive dividends is forfeited in any year that dividends are not declared while noncumulative stock's undeclared dividends accumulate each year until paid.

Question

Quizplus · Accepted Answer

Cumulative preferred stock's undeclared dividends accumulate each year until paid while noncumulative stock's right to receive dividends is forfeited in any year that dividends are not declared. This means that cumulative preferred stockholders have a higher chance of receiving their dividends even if the company is not doing well, while noncumulative stockholders may not receive dividends in low-profit years.

Which of the Following Is a Correct Statement About Cumulative