When a corporation has both common stock and preferred stock outstanding:
A)dividends on preferred stock are paid only if the company has current earnings.
B)dividends on preferred stock must be paid before dividends on common stock can be paid.
C)preferred stockholders receive the same dividend per share as common stockholders.
D)dividends on preferred stock are paid only if dividends are to be paid on the common stock.

Question

Quizplus · Accepted Answer

Preferred stockholders have a higher claim on dividends than common stockholders, meaning dividends on preferred stock must be paid before any dividends can be paid to common stockholders.

When a Corporation Has Both Common Stock and Preferred Stock