When Preferred Stock Is Converted to Common Stock

question 16

Multiple Choice

When preferred stock is converted to common stock

• A) The debt-to-equity ratio decreases.
• B) The debt-to-equity ratio increases.
• C) The debt-to-equity ratio is unchanged.
• D) A gain or loss is reported in earnings for the difference between the fair value of the common stock and the book value of the preferred stock that was converted.

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Definitions:

Anxiety Disorder

A mental health disorder characterized by feelings of worry, anxiety, or fear that are strong enough to interfere with one's daily activities.

Biological Condition

A state or circumstance of a living organism or bodily part resulting from a genetic or environmental factor.

Etiology

Factors that contribute to the development of disordered thoughts, emotions, and/or behaviors.

Obsessive-compulsive Disorder (OCD)

A mental health disorder where a person has recurring, unwanted thoughts (obsessions) and behaviors (compulsions) they feel compelled to repeat.