Dividends in arrears on cumulative preferred shares
A)never have to be paid, even if common dividends are paid.
B)must be paid before common shareholders can receive a dividend.
C)should be recorded as a current liability until they are paid.
D)enable the preferred shareholders to share equally in corporate profits with the common shareholders.

Question

Quizplus · Accepted Answer

Dividends in arrears on cumulative preferred shares must be paid before any dividends can be distributed to common shareholders. This is a key feature of cumulative preferred shares, ensuring that preferred shareholders receive their due dividends before common shareholders receive any.

Dividends in Arrears on Cumulative Preferred Shares