Products & RisksQuestion 3 of 125
Cumulative preferred stock differs from straight (noncumulative) preferred stock in that cumulative preferred:
a.Requires that any skipped dividends accumulate and be paid before common dividends resume
b.Pays a dividend that increases automatically each year
c.Can be converted into common stock at the holder's option
d.Carries full voting rights equal to common shares
Explanation
With cumulative preferred, dividends that are missed accumulate as arrears and must be paid in full before the corporation may pay any dividend to common shareholders. Straight preferred loses skipped dividends permanently.
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