Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

Company A pays a dividend of $2 per share on its preferred stock. If the preferred stock is cumulative and the company missed last year's dividend payment, how much must the company pay per preferred share before any dividends can be paid to common shareholders?

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Understand the concept of cumulative preferred stock: Cumulative preferred stock means that if a company misses a dividend payment in any year, the unpaid dividends accumulate and must be paid in full before any dividends can be paid to common shareholders.

Identify the dividend amount per share: The company pays $2 per share as a dividend on its preferred stock.

Determine the missed dividend: Since the company missed last year's dividend payment, the $2 per share from the previous year is still owed to the preferred shareholders.

Add the current year's dividend: The company must also pay the $2 per share dividend for the current year, as preferred shareholders are entitled to their annual dividend.

Calculate the total amount owed per preferred share: Add the missed dividend from last year ($2) to the current year's dividend ($2), resulting in a total of $4 per preferred share that must be paid before any dividends can be distributed to common shareholders.