Question

Cumulative stock means that the preferred stock:

a. Can be sold back to the company.
b. Has the right to dividends in arrears before the current-year dividend is distributed.
c. Can be eliminated by the firm by paying the stockholders a specified amount.
d. Can be exchanged for common stock.

Answer 1

Cumulative stock means that preferred stock has the right to dividends in arrears before the current-year dividend is distributed.

Step-by-step explanation:

Cumulative stock refers to preferred stock that has the right to dividends in arrears before the current-year dividend is distributed. This means that if a company is unable to pay dividends in a particular year, the dividends accumulate and must be paid before any dividends can be distributed to common stockholders.