A company has outstanding 10 million shares of $2 par common stock and 1 million shares of $4 par preferred stock. The preferred stock has an 8% dividend rate. The company declares $300,000 in total dividends for the year. Which of the following is true if the preferred stockholders have a cumulative dividend preference? Solution Preferred stockholders will receive the entire $300,000, and they must also be paid $20,000 sometime in the future before common stockholders will receive anything. .