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What happens in preferred stock with non-cumulative dividends:

0
A) Dividends become common stock dividends
B) Unpaid dividends are carried forward
C) Dividends increase next year automatically
D) Unpaid dividends do not accumulate

Correct Answer: D) Unpaid dividends do not accumulate

• In non-cumulative preferred stock, if the company skips a payment, the Unpaid dividends do not accumulate. • The company is under absolutely no legal obligation to pay missed dividends in the Future years. • In strict contrast, cumulative preferred stock requires that all skipped dividends be paid out as Arrears. • Preferred stockholders generally do not possess standard corporate Voting rights.

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