A corporation with preferred stock and common stock outstanding has a substantial balance in its retained earnings

Question:

A corporation with preferred stock and common stock outstanding has a substantial balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferred dividend of $150,000 each quarter and a common dividend of $40,000 each quarter, the board of directors declares dividends only on the preferred stock. Suggest possible reasons that the board did not declare dividends on the common stock.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...