Q603
Type of preferred stock whose payments are missed and must be paid before paying dividends of common stock is classified as
A.
non participating preferred stock
B.
participating preferred stock
C.
non cumulative preferred stock
D.
cumulative preferred stock
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
Type of preferred stock whose payments are missed and must be paid before paying dividends of common stock is classified as cumulative preferred stock. Cumulative preferred stock is a type of preferred stock with a provision that stipulates that if any dividend payments have been missed in the past, the dividends owed must be paid out to cumulative preferred shareholders first.