If preferred stock issue is cumulative

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Reference no: EM131850829

1. If a preferred stock issue is cumulative, this means:

unpaid preferred stock dividends are paid at the end of the year

unpaid preferred stock dividends are legally binding on the corporation

unpaid preferred stock dividends must be paid in the future before common stock dividends can be paid unpaid

preferred stock dividends are never repaid

2. Three of the following considerations may suggest that the firm should start paying out cash to its shareholders. Which one is not a relevant consideration?

Is the company generating positive free cash flow?

The company is earning a high profit margin?

Does the company have sufficient cash for emergencies and unexpected investment opportunities?

Is the debt ratio prudent?

Reference no: EM131850829

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