Which of the following statements is true regarding dividends on preferred stock?
A) Preferred shareholders are guaranteed an annual dividend.
B) Preferred shareholders will receive a dividend if common shareholders are paid.
C) Preferred dividends in arrears are a current liability.
D) Preferred dividends in arrears are either a current or long-term liability, depending upon when the corporation last declared a dividend.

Question

Quizplus · Accepted Answer

Preferred shareholders typically have a priority over common shareholders when it comes to dividends, meaning if dividends are distributed, preferred shareholders will receive their dividends before any are paid to common shareholders. However, dividends are not guaranteed unless declared by the company's board of directors. Dividends in arrears are not considered a liability but rather a contingent event that becomes an actual liability only when declared.

Which of the Following Statements Is True Regarding Dividends on Preferred