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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
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.
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