Sometimes firms fall behind in their preferred dividend payments. However, preferred stockholders do not receive...
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Accounting
Sometimes firms fall behind in their preferred dividend payments. However, preferred stockholders do not receive any interest on accumulated dividends. As a result, some have argued that firms have an incentive to delay paying preferred dividends. Which of the following might be an argument against this? A. Failure to make preferred dividend payments will cause the firm to go into default. B. If preferred dividends have not been paid in a long time, common stockholders may be forced into sharing some control with preferred stockholders. C. After three consecutive missed preferred dividends, preferred stock is immediately converted to common stock. D. Firms must pay a penalty to stockholders for delaying preferred dividends.
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