Question

Preferred stock which confers rights to prior periods' unpaid dividends even if they were not declared is called:

A. Noncumulative preferred stock.
B. Participating preferred stock.
C. Callable preferred stock.
D. Cumulative preferred stock.

Answer 1

D. Cumulative preference stock.

Step-by-step explanation:

A. Non cumulative Pref stock: if preference dividend is not paid in the current year, it is forfeited.

B. Participating Pref Stocks: Holders can participate in profit sharing after receipt of fixed interest.

C. Callable Pref Stock: This are stocks that the company can redeem in between. Hence the company can redeem it at a premium.

D. Cumulative Pref Stock: The dividend are accumulated and paid anytime before payment to common stock holders.