Question

Question: Match each description 1 through 4 with the characteristic of the preferred stock that it best describes by writing the letter of that characteristic in the blank next to each description.

A. Cumulative B. Noncumulative C. Nonparticipating D. Participating

1. Holders of the stock are entitled to receive current and all past dividends before common stockholders receive any dividends.

Short answer

Description	Answer
1.	A

Step-by-step solution

Meaning of Preference Stockholders

Preference stockholders are shareholders with no voting rights but are given priority before the common stockholders while issuing dividends.

Match the description with characteristics

Holders of the stock are entitled to receive current, and all past dividends before common stockholders receive any dividends. This description is matched with the characteristics of cumulative shares.

Characteristics of Cumulative preference stock

Cumulative preference stock usually has all the features and benefits of preferred stock. Still, it has one extra benefit: if the company could not pay dividends last year, the company would pay the dividend of the previous year and the current year.