Question

If a corporation’s board of directors decides not to pay dividends to preferred stockholders, holders of this type of preferred stock must be paid the previously skipped dividends before any future dividends are distributed to common stockholders:______________

Answer 1

Answer: True

Step-by-step explanation: The preferred stock refers to a kind of security in which the holders of the security will be paid a fixed level of payment on timely basis but only when the profits are enough to distribute the dividends to them.

They are paid before the equity holders but after the bond holders, so they remain in between in case of liability.

Hence from the above we can conclude that the given statement is correct.