Question

The shares of preferred stock issued by Saturn Corporation can be exchanged for common stock. However, any dividends in arrears are lost. Which of the following features are present in the preferred stock issued by Saturn?Select all answers that apply to this question.ConvertibleRedeemableCumulativeNoncumulative

Answer 1

Convertible and Noncumulative features are present in the preferred stock issued by Saturn.

Explanation:

It requires the owners of these preferred shares to be traded for common stocks so as to have the possibility of exchanging their preferential stock to common equity within a predisposed time.

Since it states that "the arrears payments have been lost," though, this means that the preferred stock does not collect.  

You have no right to receive past dividends as the holders of this form of share if the Company starts to question again expectations for dividends. If the distributing company is making losses during that year, it can opt to miss dividends on such non-cumulative, convertible redeemable preferred stock.