Question

Cumulative preferred stock means the stock is entitled to its regular dividend plus an additional share of the total amount of declared dividends. True or False True False

Answer 1

"Cumulative preferred stock means the stock is entitled to its regular dividend plus an additional share of the total amount of declared dividends" is FALSE.

Option: B

Explanation:

Cumulative preferred stock is the opted stock which accumulates the right to obtain a common dividend if the dividend is not paid. Companies are required to pay unpaid preferred cumulative dividends before charging any dividends on the common stock. This suggests that if this year the company doesn't pay dividends, the money due from this year will be rollovered to next year. Until the common shareholders can collect a dividend, preferred shareholders will earn all the dividends owed.