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Cumulative Preferred Stock: Definition & Advantage

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question 1 of 3

Which of the following is NOT a characteristic of preferred stock?

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1. Calculate the amount of dividend payment to preferred shareholders this year given the following information: The ABC Company has 50,000 cumulative preferred shares with a dividend rate of $1.30 per share. The company was unable to pay its preferred dividends last year but declared a dividend of $150,000 this year.

2. Calculate the amount of dividend payment to preferred and common shareholders given the following information: The PDQ Company has common and cumulative preferred shares. Its 25,000 cumulative preferred shares have a dividend rate of $1.00 per share. PDQ was unable to pay dividends last year but has declared a dividend of $70,000 this year.

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About This Quiz & Worksheet

Using the worksheet/quiz combo, you can assess your knowledge of cumulative preferred stock. You need to know about characteristics of preferred stock and the benefits of cumulative preferred stock for the quiz.

Quiz & Worksheet Goals

The goal of these resources is to check your understanding of:

  • Practice problems that involve finding the dividend payment to different types of stock holders
  • Advantages of owning cumulative preferred shares
  • What is and is not a characteristic of preferred stock

Skills Practiced

  • Information recall - access the knowledge you have gained about the benefits of owning cumulative preferred shares
  • Knowledge application - use your knowledge to answer questions about calculating dividend payments to preferred shareholders
  • Reading comprehension - ensure that you draw the most important information from the lesson on cumulative preferred stock

Additional Learning

Cumulative Preferred Stock: Definition & Advantage is a lesson you can access to review more topics, including:

  • The differences between common and preferred stock
  • What 'dividends in arrears' refers to
  • What non-cumulative preferred stock is
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