Not paying the dividends on a cumulative preferred issue may result in:
A) preferred dividend arrears that can be eliminated by the common shareholders only after common dividends are paid.
B) additional voting rights are granted to common stockholders if dividends are in arrears.
C) full payment of dividends to common shareholders.
D) both preferred dividend arrears that can be eliminated by the common shareholders only after common dividends are paid; and additional voting rights are granted to common stockholders if dividends are in arrears.
E) both voting rights are granted to preferred stockholders if preferred dividends are in arrears; and no payment of dividends to common shareholders.

Question

Quizplus · Accepted Answer

Cumulative preferred stock accumulates dividends when they are not paid. These dividends must be paid before any dividends can be paid to common shareholders. Additionally, if preferred dividends are in arrears, preferred stockholders may be granted voting rights, which they typically do not have, to protect their interests.

Not Paying the Dividends on a Cumulative Preferred Issue May