Question

Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders. T/F

Answer 1

Answer: True

Explanation: Cumulative preferred shares of a company carries some special rights as per law. The holders of such stock must be paid any current or prior period accrued dividends before any payment of dividend to common shareholders. The dividends of such shareholders is fixed in nature.

Also in the event of liquidation they will be preferred before any common stock holders.

Thus, the given statement is true.