Question

Preferred stockholders:a. must receive more dividends per share than the common stockholders.b. must receive dividends every year.c. have the right to receive dividends only in the years the board of directors declares dividends.d. have the right to receive dividends only if there are enough dividends to pay the common stockholders too.

Answer 1

Answer:

The answer is C.

Explanation:

Preferred shares is synonymous to debt. It has the characteristics of debt and equity. They are given preferential treatment. If a company liquidates, they will be settled before the common shares.

Out of all the options, option C. is correct. They have the right to receive dividends only in the years the board of directors declares dividends. This applies to both preferred shares and common shares. If the board of directors does not declare dividends, nobody receives.

Option A is wrong because they only receive dividend according to the number of shares they are holding in the company.

Option B is wrong because they receive shares only in the the board declares dividends.

Option D is also wrong.