Which one of these statements related to preferred stock is correct?
A) Preferred shareholders normally receive one vote per share of stock owned.
B) Preferred shareholders determine the outcome of any election that involves a proxy fight.
C) Preferred shareholders are considered to be the residual owners of a corporation.
D) Preferred stock normally has a stated liquidating value of $1,000 per share.
E) Cumulative preferred shares are more valuable than comparable noncumulative shares.

Question

Quizplus · Accepted Answer

Cumulative preferred shares are more valuable than comparable noncumulative shares because they have a feature that requires the company to pay all dividends (including any that are missed) to preferred shareholders before any can be distributed to common shareholders. This provides an additional layer of security for the dividends of preferred shareholders.

Which One of These Statements Related to Preferred Stock Is