The cumulative feature of preferred stock
A) limits the amount of cumulative dividends to the par value of the preferred stock.
B) requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.
C) means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock.
D) enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends.

Question

Quizplus · Accepted Answer

The cumulative feature of preferred stock means that if dividends are not paid in any year, they must be paid in a future year before any dividends can be paid to common shareholders. This does not limit dividends to the par value, allow for automatic conversion into common stock, or enable receiving stock in place of dividends.

The Cumulative Feature of Preferred Stock