Which statement about dividends is correct?
A)Dividends on cumulative preferred shares are not discretionary payments.
B)Dividends are mandatory payments required for both common and preferred shares.
C)Dividends are discretionary payments that can be made for common and preferred shares.
D)Dividends must be paid on common shares before dividends can be paid on preferred shares.

Question

Quizplus · Accepted Answer

Dividends are discretionary payments that can be made for both common and preferred shares. They are not mandatory and can be adjusted by the company's board of directors depending on various factors such as financial performance, cash flow, and investment opportunities. Cumulative preferred shares, however, have a guaranteed dividend payment that must be made before any other dividends can be distributed. Preferred shareholders usually receive their dividends before common shareholders, but this can change depending on the terms of the preferred shares.

Which Statement About Dividends Is Correct