Question

When preferred stock is cumulative and the directors either do not declare a dividend to preferred stockholders or declare one that does not cover the total amount of the cumulative dividend, the unpaid dividend amount is called:

Answer 1

The unpaid dividend amount is known as dividend in arrears.

What is preferred stock?

Preferred stock entitles its holders to receipt of dividends before common stockholders and after the bondholders have received their interest payments.

What is cumulative preferred stock?

This has a  edge over the ordinary preferred stocks since its holders are entitled to receive arrears of dividends, dividends not declared in a particular year or the shortfall in dividends, which means in future years they would receive that year's dividends plus any unpaid dividends in earlier years.

The amount of preferred dividends that could not be paid in a particular year because there is no  cash available or that dividends were not declared are known as dividends in arrears.

Overall, the correct answer with which to fill the space in the case is dividends in arrears.

Read more on dividends in arrears on:brainly.com/question/14006397

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