I’m seeing questions where the info reads something like “8,000 shares of 10%, $100 par value cumulative preferred stock were outstanding for the entire year.”
However, the question doesn’t say if preferred dividends were paid… In the real test, if it doesnt say dividends paid then do you assume it wasnt paid?
Yes, assume paid because preferred stock pays dividend by definition, doesn’t need to be said. Common stock is the stock class that has dividends that are discretionary
Yeah pref divs are always paid, so that’s -80k from the numerator.
I thought preferred stock never guaranteed a dividend. That’s why theres non-cumulativepreferred and cumulativepreferred which puts a distiction on if the holder gets a dividend later for missed dividend payments.
You’re correct: the preferred dividend isn’t guaranteed.
However, it must be paid before any common dividend can be paid; therefore, the amount of the preferred dividend – paid or not – does not belong to the common shareholders. That’s why it’s subtracted from net income.