The type of preferred stock whose paid dividends are more than the promised dividends is classified as ____________?
Correct answer: D. participating preferred stock
- A. non-cumulative preferred stock
- B. cumulative preferred stock
- C. non participating preferred stock
- D. participating preferred stock
Explanation
Participating preferred stock can receive dividends above its stated or promised rate when extra distributable earnings are available. Cumulative preferred stock only carries unpaid dividends forward and does not itself imply excess dividends.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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