The type of preferred stock whose payments are missed and must be paid before paying dividends of common stock is classified as ___________?
Correct answer: D. cumulative preferred stockAccounting & Auditing
- A. non participating preferred stock
- B. participating preferred stock
- C. non-cumulative preferred stock
- D. cumulative preferred stockAccounting & Auditing
Explanation
Cumulative preferred stock carries unpaid dividends forward when they are missed, and those arrears must be settled before common-stock dividends are paid. Non-cumulative preferred stock does not provide this protection.
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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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