Asked by Suraksha Lamichhane on Jun 04, 2024
Verified
If a firm has missed one or more dividends on cumulative preferred stock, it must make them up before any dividends can be paid to common shareholders.
Cumulative Preferred Stock
A type of preferred stock where dividends accrue if not paid in a given year, and all accrued dividends must be paid before dividends can be paid on common stock.
Dividends
A portion of a company's earnings that is paid to shareholders, usually on a quarterly basis.
Common Shareholders
Individuals or entities that own a portion of a company's equity through its common shares, giving them voting rights and a claim on a portion of its profits.
- Acknowledge the limitations and elasticity in dividend disbursement policies.
Verified Answer
NK
Nazeli KhachatryanJun 09, 2024
Final Answer :
True
Explanation :
This is the definition of cumulative preferred stock - any missed dividends must be made up before common shareholders can receive any dividends.
Learning Objectives
- Acknowledge the limitations and elasticity in dividend disbursement policies.